A growing number of Australians are living in homes that are either uninsured or underinsured – leaving them financially exposed as climate-related disasters become more frequent and severe.
New findings from the Melbourne Institute’s HILDA survey reveal that over 340,000 households have no home insurance, while another 530,000 hold policies that would not fully protect them in the event of a major loss.
The research paints a stark picture: more than 800,000 households with over 2 million people face serious financial risk if disaster strikes. For many, the problem is not a lack of awareness but the rising cost of premiums. Between 2022 and 2023, average home insurance prices jumped by 14% – the sharpest increase in 10 years.
The financial consequences could be devastating. Analysis by the Australia Institute shows that a typical middle-income household would lose approximately 74% of its total wealth if it lost an uninsured home to a natural disaster. For the 300,000-plus households still servicing mortgages on these properties, that vulnerability extends beyond personal hardship to institutional risk.
Home loans typically require borrowers to maintain full building insurance. Failure to do so can breach mortgage conditions, potentially triggering higher interest rates or even foreclosure. At a systemic level, the report estimates that banks are exposed to more than $100 billion in mortgages tied to inadequately insured homes – posing a threat to financial stability should widespread disaster occur.
The rising cost of insurance is closely tied to climate change. More frequent and destructive extreme weather events have increased the volume and severity of claims, driving up premiums across the country. In 2022 alone, nearly one in 20 Australians experienced damage or destruction of their home due to a weather-related event – the highest rate on record. And since 2013, annual insured losses have exceeded the total combined from 2000 to 2004.
This trend is being amplified by pressures in the global reinsurance market. As climate disasters mount worldwide, even reinsurers have raised their rates. These costs are passed on to Australian providers, contributing to further hikes in domestic premiums.
