Home Insurance

What's a Good Excess for Home Insurance in Australia? (The Answer Might Surprise You)

Updated May 2026  |  8 min read

When Australians set up home insurance, most pick the lowest excess available. It feels like the safe choice. Pay less if something goes wrong. The problem is that "lower excess" always means "higher premium," and for most homeowners the maths works out in the wrong direction.

Understanding your excess properly is one of the fastest ways to cut your annual insurance cost without reducing your actual protection.

What Is an Excess and When Do You Pay It?

Your excess is the amount you contribute out of pocket when you make a claim. The insurer pays everything above it.

So if you have a $1,000 excess and a storm causes $8,000 of damage to your roof, you pay $1,000 and the insurer covers the remaining $7,000. If the damage only costs $800 to fix, you pay the whole amount yourself because it falls below your excess threshold. Making a claim in that scenario would achieve nothing.

You pay the excess at claim time, not upfront when you buy the policy. If you never claim, you never pay it.

The key implication: your excess is only relevant when you actually make a claim. For most Australian homeowners, that happens infrequently.

The Excess-Premium Trade-Off

Every insurer prices excess and premium as a seesaw. A lower excess means a higher annual premium. A higher excess means a lower annual premium. That relationship is consistent across the market, though the specific numbers vary by insurer and property.

As a rough guide, moving from a $500 excess to a $2,000 excess on a standard Australian home insurance policy typically reduces the annual premium by 10 to 25%. On a $1,800 annual premium, that could be $180 to $450 per year.

The insurer is essentially offering you a bet. They will charge you less per year if you agree to absorb more of any future claim yourself. Whether that bet is worth taking depends on your personal financial situation and how often you are likely to claim.

How to Think About the Right Excess for Your Situation

Three factors determine where your excess should sit.

Your emergency fund. The excess needs to be an amount you can access quickly without stress. If $1,500 is a financial emergency for your household, a $1,500 excess is the wrong choice regardless of the premium saving. Your excess should be money you could genuinely produce within a week without disrupting your finances.

Your property and claim profile. Older homes, properties in high-risk weather areas, and homes with more complex systems (older plumbing, ageing roofs) have a higher statistical likelihood of generating a claim. If your property carries elevated risk, the calculus shifts toward a lower excess. If you have a newer home in a stable suburb, you can afford to be more aggressive.

How you use the policy. Some homeowners claim frequently for smaller events. Others treat home insurance as catastrophe cover only and self-insure minor damage. If you know you would only ever claim for serious events, a higher excess makes more sense because you are not going to use it for small repairs anyway.

The Standard Range in Australia

Home insurance excesses in Australia typically fall between $500 and $2,000 for standard building and contents cover. The most common default option offered by insurers sits around $500 to $750, which happens to be the option that generates the highest premium revenue. That is not a coincidence.

For most Australian homeowners with a working emergency fund, a $1,000 excess is the practical sweet spot. It is low enough to be manageable on a real claim, high enough to produce a meaningful premium reduction, and sits comfortably within what most households could access without financial strain.

Watch Out for Special Excesses

The excess you choose when setting up your policy is the standard excess. Most policies also carry additional special excesses that are separate, often larger, and frequently buried in the Product Disclosure Statement.

These are the ones that catch people out.

Flood excess. Many policies carry a specific flood excess that is higher than the standard excess, sometimes significantly. This is disclosed in the PDS but rarely highlighted during the sale. In a flood claim, you pay the flood excess, not your standard excess.

Bushfire excess. In high-risk bushfire zones, some insurers apply a separate bushfire excess, particularly in the first period of cover after purchasing a new policy. Worth checking if your property is in a fire-prone area.

Age-based or voluntary excess. Some policies allow you to add a voluntary excess on top of the standard excess in exchange for a further premium reduction. If you have done this, remember that in a claim you pay both the standard excess and the voluntary excess combined.

The Maths on Raising Your Excess

Here is a straightforward way to evaluate whether a higher excess makes financial sense for you.

Say you are currently on a $500 excess paying $1,800 per year. Your insurer quotes $1,500 per year if you raise your excess to $1,500. That is a $300 annual saving.

By raising the excess, you are taking on an additional $1,000 of risk per claim (the difference between $1,500 and $500). To break even on that decision, you would need to make a claim at least once every 3.3 years.

The actual claim frequency for Australian homeowners is considerably lower. Most Australians make a home insurance claim less than once every 10 years on average. At that frequency, the higher excess pays for itself roughly three times over across the same period.

The numbers shift if your property has specific risk factors or if you have had multiple recent claims. But for the average homeowner on a standard residential property, the higher excess is almost always the better financial decision.