It’s becoming a question no one wants to answer: pay rising insurance premiums or risk going without coverage entirely. For thousands of Australians, that difficult choice is becoming the reality.
Underinsurance Leaves Millions Exposed
The rise in home insurance premiums is pushing many households toward dangerous compromises. A growing number of Australians are either cutting back their coverage or dropping insurance altogether. Data from the HILDA Survey shows that as of 2023, around 1 in 20 homes are underinsured—meaning the coverage wouldn’t fully cover a rebuild if disaster struck.
It’s not just a statistical issue. The Australia Institute estimates that around 800,000 properties across the country are either underinsured or not insured at all, with a total value of at least $119 billion. Even more concerning: about 300,000 of those homes still have mortgages, reports The Age. This presents serious legal and financial risks.
Most mortgage contracts require full building insurance. If that coverage lapses or is insufficient, borrowers may unknowingly breach the terms of their loan agreements.
Climate Disasters Push Premiums Higher
The pressure on the insurance system is being driven largely by weather-related disasters. Bushfires, floods, and cyclones are becoming more frequent and severe. According to the Climate Council, more than 650,000 homes are already classified as high-risk, and another 100,000 may be added to that category within the next 25 years.
In 2022, nearly 1 in 20 Australians experienced damage or total loss of their home due to natural disasters. As the risks grow, so do premiums. In 2025 alone, insurance costs rose by an average of 14% nationally, with increases of 17% in Victoria and 18% in New South Wales, according to industry analysis.
When Insurance Becomes Too Expensive
With the average increase adding hundreds of dollars to yearly bills, many Australians are reaching breaking point. In some cases, premiums jumped by over $700 in just 12 months. Forced to make hard choices, some households drop cover altogether—despite the risk of losing everything in a single event.
Worse still, if a policy lapses, the bank may apply forced place insurance, which is usually much more expensive and offers less protection. Customers foot the bill, but lose the benefits of loyalty discounts or tailored coverage.
There Are Still Ways To Reduce Costs
Despite the trend, switching insurers can still offer savings. A review by Canstar found that households who switched providers saved an average of $766 per year. Government grants and home resilience funding in areas like NSW and Queensland may also lower premiums for homeowners who invest in disaster-proofing their properties.
Some insurers now offer discounts for improvements that increase a home’s ability to withstand fire or flood. A $30,000 retrofit in bushfire-prone areas, for example, can lift a safety rating by two stars—and may result in real savings.
A Shifting Insurance Landscape
As risks rise and costs climb, the insurance system faces growing pressure. For households already dealing with inflation and high living costs, the extra financial burden is difficult to absorb. But going without insurance leaves many dangerously exposed—not just to natural disasters, but also to legal and financial complications tied to their mortgages.
There’s no easy answer, but one thing is clear: insurance is no longer something Australians can take for granted.
