The binder · a guide published by Dotto
Buying home, contents and car insurance with the paperwork open
Buy Insurance is a guide to buying general insurance well in Australia (home building, home contents and car cover), written and published by Dotto. It keeps six tabs, one for each document or rule a buyer meets, and every line is read against ASIC’s Moneysmart, the legislation and the General Insurance Code of Practice.
Index
Six tabs, in the order you meet them
Key facts sheets
The government-set summary insurers must provide for home building and home contents policies: what is on it, when it arrives and what it cannot do.
The PDS and the TMD
The product disclosure statement, which holds the detail of the cover, and the target market determination, which describes who the product was designed for.
Sum insured and underinsurance
Rebuild cost against market value, the costs that get missed, and a worked example of how averaging clauses shrink a payout.
The General Insurance Code of Practice
The Insurance Council’s code: who signs it, what it covers, and the clock it sets for claims and complaints.
Cooling-off and cancelling
The 14-day right to return a policy under the Corporations Act, when it ends early, and what the Code says about refunds after that.
When a claim is refused
The written reasons an insurer gives, the internal complaint, and the path to AFCA with its time limits.
What the binder covers
Three kinds of cover, three different jobs
Home building
Covers the cost of repairing or replacing the house when something goes wrong: the building itself and fixtures such as plumbing and built-in cabinetry, and usually other structures like a garage or inground pool.
Owners of a strata-titled unit can check with the body corporate, which may be responsible for insuring the building. Renters don’t need it; the building is the landlord’s responsibility.
Home contents
Covers household items and personal belongings if they are damaged, lost or stolen, such as furniture, clothes, a computer, fridge, television, tools and jewellery.
Moneysmart notes that contents insurance can also carry legal liability cover, which applies when you are found legally responsible for damage or personal injury to someone else or their property.
Car
Compulsory Third Party (CTP) covers injuries to people caused by your car, and you must have it to register the car. It does not cover damage to cars or property.
The other kinds of car insurance are optional, and they differ in whose car and property they pay for. The table below sets them side by side.
| Kind | Other people’s cars and property | Your own car |
|---|---|---|
| Compulsory Third Party | Not covered; CTP covers injuries to people | Not covered |
| Third party property damage | Covered when caused by your car | Not covered (some policies let you pay extra for theft and fire) |
| Third party property damage, fire and theft | Covered | If stolen or damaged by fire |
| Comprehensive | Covered, even if you caused the accident | Damage, theft, fire and weather events, subject to exclusions |
Comprehensive policies value the car one of two ways. An agreed value is fixed between you and the insurer and may be reduced each year as the car ages; a market value is decided by the insurer at the time of the accident. Moneysmart notes that agreed value costs a higher premium.
The papers you are handed
The papers handed over before you buy
Key facts sheet
For home building and home contents insurance, the law sets what the sheet contains and how it looks, down to the typeface and colours, so policies can be compared like for like.
Product disclosure statement
Holds the detail: the benefits, the significant risks, the cost, the terms, the dispute resolution system and any cooling-off regime.
Target market determination
A written document from the insurer describing the class of consumers the product is designed for, made available to the public free of charge before the product is distributed.
Glossary
Words on the policy
- Premium
- What you pay for the policy. It can be quoted as a yearly, monthly or quarterly amount.
- Excess
- The amount you pay when you make a claim. A higher excess usually means a lower premium, and more to pay at claim time.
- Exclusion
- Something the policy does not cover. To find them all, you may need to read the product disclosure statement.
- Sum insured
- A set amount of cover. Some home policies instead offer “total replacement”, the full rebuild cost.
- Flood
- Home and contents insurance uses one standard definition: land that is normally dry being covered by water that has escaped, or been let out, from the normal confines of a lake, a river, creek or other natural watercourse (altered or not), or a reservoir, canal or dam.
- Cover limit
- The most you can claim for certain items, events or benefits.
Once a year
The renewal notice is a document too
Moneysmart’s advice at renewal is not to simply accept the notice: check that the sum insured still covers rebuilding (including the effect of inflation and any changes to the property), that the excess is still affordable, and whether exclusions or limits have changed.
Insurers that have adopted the General Insurance Code of Practice commit, when they offer to renew a home building, home contents or car policy bought directly from them (fleet and business car policies aside), to show this year’s premium beside last year’s and explain how it is calculated. What else the Code commits insurers to.
If something goes wrong later, Moneysmart sets out the order: raise it with the insurer, make a formal complaint in writing if that does not fix it, then take it to the Australian Financial Complaints Authority. The complaint path, step by step.