Does Home Insurance Cover 100%? What’s Really Included and What’s Left Out

Most people assume that if they pay for home insurance, their house and everything inside it are fully protected. But here’s the truth: home insurance rarely covers 100%-not even close. Even the most comprehensive policies leave gaps that can cost you thousands if disaster strikes. If you think your policy will replace everything after a fire, flood, or burglary, you’re setting yourself up for a nasty surprise.

What home insurance actually covers

Standard home insurance in Australia typically includes two main parts: building cover and contents cover. Building cover protects the structure of your home-walls, roof, floors, fixed fixtures like kitchens and bathrooms. Contents cover handles your personal belongings: furniture, electronics, clothing, appliances, and valuables.

But even here, there are limits. Most insurers cap the amount they’ll pay out for certain items. For example, a policy might cover up to $1,500 for jewelry, $1,000 for cash, or $500 for a single laptop. If your engagement ring is worth $8,000 and gets stolen, you’ll only get a fraction back unless you’ve added a special rider for high-value items.

Insurers also set a maximum sum insured for your entire home. That’s the total amount they’ll pay to rebuild or replace everything. If you underinsure-say, you estimated your home’s rebuild cost at $400,000 but it actually costs $600,000-you won’t get the full amount needed to fix it. You’ll be left paying the difference out of pocket.

Why 100% coverage doesn’t exist

Insurance isn’t designed to make you rich. It’s meant to restore you to the condition you were in before the loss. That’s called ‘indemnity’. So if your 10-year-old TV was destroyed in a storm, you won’t get a brand-new 8K model. You’ll get what it was worth at the time of loss, minus depreciation. That’s called ‘actual cash value’.

Some policies offer ‘new for old’ replacement, but even that has limits. It usually only applies to items under a certain age or value, and only if you’ve insured your contents for the full replacement cost. If you haven’t, the insurer will still apply depreciation.

Then there’s the deductible-the amount you pay before the insurer steps in. Most policies have a $500 to $2,000 deductible. So even if your claim is approved, you’re still out of pocket hundreds or thousands right away.

Big exclusions most people don’t know about

Here’s where things get risky. Many claims get denied because people assume their policy covers things it doesn’t. These are the top exclusions:

• Gradual damage-like a slow leak under the sink that’s been dripping for months. Insurance only covers sudden, accidental events.
• Natural disasters-floods, earthquakes, and bushfires are often excluded unless you’ve paid extra for cover. In Queensland and NSW, flood cover is optional and expensive.
• Wear and tear-a roof that’s 25 years old and leaks? That’s your problem.
• Home businesses-if you run a bakery out of your kitchen or rent out a room on Airbnb, your standard policy won’t cover business equipment or liability.
• Unoccupied homes-if you leave your house empty for more than 30 to 60 days, coverage can vanish.

In 2024, the Australian Financial Complaints Authority (AFCA) handled over 1,200 complaints about home insurance denials. The most common reason? Policyholders didn’t understand their exclusions.

What you can do to get closer to 100% coverage

You can’t get 100% coverage-but you can get much closer with smart choices:

1. Get a professional rebuild cost estimate. Don’t guess. Use the online tools from the Master Builders Association or hire a building surveyor. Underinsuring is the #1 mistake homeowners make.
2. Insure contents for replacement cost. Ask your insurer if they offer ‘new for old’ on contents. If not, switch.
3. Add scheduled items. For jewelry, art, collectibles, or high-end electronics, list them separately with proof of value (receipts, appraisals). This removes the per-item cap.
4. Buy flood and bushfire cover. If you live near a river, creek, or bushland, don’t skip this. It’s not cheap, but it’s cheaper than losing your home.
5. Review your policy every year. Home renovations, new purchases, or inflation can change your needs. A policy from 2022 is probably outdated in 2025.

Real-life example: What happens when coverage falls short

A family in Logan, Queensland, had a pipe burst in their bathroom in early 2025. Water soaked through two floors, ruined flooring, cabinetry, and their entire entertainment system. They thought their $1.2 million policy would cover everything.

Turns out, their rebuild cost was $1.4 million. Their contents were insured for $80,000, but their TV, sound system, and laptop were worth $22,000 combined. The policy only paid $10,000 for contents because it used actual cash value, not replacement cost. They also didn’t have flood cover, so the water damage claim was partially denied.

In the end, they were out $180,000. They had to take out a personal loan to fix their home. All because they assumed their policy was ‘full’.

How to check your coverage right now

Grab your policy document and answer these five questions:

• Is my building sum insured based on current rebuild cost, not market value?
• Do I have ‘new for old’ cover on contents, or just ‘actual cash value’?
• What are the per-item limits for jewelry, electronics, and cash?
• Do I have separate cover for floods, earthquakes, or storm damage?
• Have I listed any high-value items separately?

If you answered ‘no’ to any of these, your coverage isn’t as complete as you think.

What happens if you don’t have enough cover?

When disaster hits and your insurance doesn’t cover the full cost, you have three options:

• Pay the difference yourself-often tens of thousands.
• Delay repairs, which can lead to more damage and lower resale value.
• Take out a loan, which adds interest and long-term debt.

None of these are good. The best move? Fix your coverage before you need it.

Bottom line

Home insurance doesn’t cover 100%. But it can cover 90%-if you know how to ask for it. Most people pay for a policy and forget about it. Smart people check it every year, adjust for inflation, add exclusions they need, and make sure their sum insured matches reality. Don’t wait for a broken pipe or a stolen TV to realize your policy is full of holes. Review it now. Talk to your insurer. Ask for a written summary of your coverage. And don’t let assumptions cost you your home.

If you’ve been putting off reviewing your home insurance, now is the time. A quick 20-minute check could save you from a financial disaster down the track. Don’t wait for the next storm to find out your policy doesn’t do what you thought.