How many Australian households are underinsured?

Insurance premiums, rebuilding costs and climate-related disasters have all increased the potential for home insurance underinsurance in Australia.

Insurance prices rose 52.7% between December 2019 and March 2026, while house construction output prices rose 48.3%. A sum insured set in December 2019 and never adjusted would equal about 67.4% of the equivalent March 2026 index value, an index-based shortfall of 32.6%.

SECTION 01 · DEFINITIONS

What is underinsurance and how does it differ from non-insurance?

Non-insurance means holding no building policy at all. Underinsurance means holding a policy, but the payout would fall short of the full cost of rebuilding or replacing what is covered. The two are often reported together, but they measure different things.

The ACCC estimated that about 20% of potentially insurable properties in Northern Australia and about 11% in the rest of Australia had no home building insurance. Separately, HILDA found that 7.8% of insured homeowners said their policy would not fund a full rebuild.

Source: ASIC, Getting home insurance right, 2005; ACCC Northern Australia Insurance Inquiry, 2019; ABS price indexes, March 2026.

SECTION 02 · NATIONAL PREVALENCE

Building and contents insurance cover falls short for some Australians

In 2023, 7.8% of Australian homeowners with building insurance said their policy would not fund a complete rebuild, while 15.1% of people with contents insurance said their cover would not replace all their contents. A further 3.7% of homeowners had no building insurance.

Why Australian homeowners report being underinsured

Not updating cover was the leading reason, narrowly ahead of affordability. Respondents could select more than one reason.

Contents insurance shortfalls are more common than building insurance shortfalls

Contents insurance ownership varies sharply by tenure, although underinsurance among those who hold a policy is close to 15% for most groups.

Why Australia has no official underinsurance statistic

No Australian source tests every policy against an individual rebuilding cost. The ACCC concluded that regional underinsurance could not be estimated with confidence, and APRA excluded underinsurance from its 2026 climate stress test because it was too complex to model.

SECTION 03 · COSTS AND PREMIUMS

How insurance prices and rebuilding costs have changed since 2019

House construction prices rose first, peaking at an annual increase of 20.5% in September 2022. Insurance prices peaked six quarters later at 16.4% in March 2024. The overlapping pressures increased both the cover required and the cost of maintaining it.

In evidence to the 2024 flood inquiry, insurers reported that some policyholders were reducing sums insured to manage premium costs. In a Northern Australian survey, 17% of policyholders who sought calculator or call-centre help selected a lower amount than recommended, mainly because of cost. Neither figure can estimate national prevalence.

SECTION 04 · STATE COMPARISON

How rebuilding cost increases vary across Australian states and territories

Since December 2019, house construction prices have doubled in Western Australia and risen by less than a fifth in the Northern Territory. The resulting index-based shortfall depends on where a property is located and when its sum insured was last reviewed.

Average approved construction values across Australian states and territories

The average approved construction value of a new Australian house was $514,782 in the 12 months to May 2026. These values exclude land and are not insured rebuild quotations.

Source: ABS Producer Price Indexes, March 2026; ABS Building Approvals, May 2026.

SECTION 05 · DISASTER EVIDENCE

What Australia's 2022 floods show about underinsurance

Four declared flood events in 2022 produced 305,769 claims worth $7.73 billion. These figures show the number and cost of claims, not whether payouts were enough to rebuild or replace what was insured.

Historical disasters have increased rebuilding costs by up to 75%

When many homes are damaged in one area, demand for builders and materials can raise local costs. Historical evidence uses different methods and cannot be converted into a national estimate.

SECTION 06 · RENTERS AND CONTENTS

Contents insurance remains uncommon among Australian renters

Around 40% of renters had no contents insurance, compared with roughly 6% to 7% of homeowners. In the ACCC survey, 59% of renters in Northern Australia and 58% elsewhere held contents cover.

The building non-insurance estimates range from 26% in the Northern Territory to 7% in South Australia. They are historical non-insurance estimates, not measures of whether insured properties had adequate cover.

SECTION 07 · COST PRESSURE

How insurance costs can contribute to underinsurance

Higher insurance costs can increase affordability pressure. NSW Treasury estimates the Emergency Services Levy added an average of 18% to residential base premiums since 2017–18, including flow-on GST and stamp duty. Treasury states the levy contributes to underinsurance and non-insurance.

How Northern Australians calculate their building insurance cover

Sixty-four per cent used an estimate of rebuilding costs, while some relied on purchase price, sale value or what they could afford. Respondents could select more than one method.

SECTION 08 · MEASUREMENT AND POLICY

Why home insurance rebuild estimates can vary

Estimates for rebuilding the same house have varied by as much as 169% between insurers’ calculators. CHOICE later found estimates for one property ranging from $601,000 to $753,000 across ten insurer brands.

Changes to building standards also matter. Rebuilds may need to meet newer energy-efficiency or livable-housing rules, but jurisdictions adopted these provisions on different dates.

Key insurance recommendations from the 2024 flood inquiry

References

• ABS, Producer Price Indexes, Australia, March 2026
• ABS, Consumer Price Index, Australia, March 2026
• APRA, Mind the Gap, March 2026
• ASIC, Getting home insurance right, September 2005
• ACCC, Northern Australia Insurance Inquiry, 2019
• Parliament of Australia, Flood failure to future fairness, 2024
• Melbourne Institute, HILDA Statistical Report 2025
• CHOICE, testing of insurer sum insured calculators

Chart Snapshots