Home Insurance: Why and When Should You Get One

Home insurance typically covers damage to your house caused by unexpected events, such as natural disasters or accidents. In Australia, it is generally necessary to have home insurance when you purchase a property. This insurance protects your home and property against damage and other unforeseen events.

Home Insurance: Why You Should Take One

Lenders often require building insurance as a condition of your loan to safeguard their investment if something happens to your home. However, the exact requirements for home insurance may vary depending on the state or territory where you are buying the property.

When it comes to home insurance, there are two primary types of coverage:

Sum-insured Cover

This type of policy estimates how much it would cost to rebuild your home if destroyed. This estimate includes the materials, labour, and other expenses of rebuilding the house to its original state.

Total Replacement Cover

With this policy, your home is insured for what it would cost to repair or rebuild it to the same standard. This means that even if the cost of rebuilding exceeds the sum insured, you will still be covered for the total cost of rebuilding your home to the same level of quality and standard as it was before the damage occurred.

When Should You Take Out a Home Loan Insurance?

Home insurance requirements vary across different states and territories in Australia. Here’s a breakdown of the criteria by location:

In Queensland, once the contracts are signed and exchanged, the buyer is responsible for the property from 5 pm on the next business day
In Victoria and New South Wales, the buyer is responsible for any damage to the property from the settlement date
In the Australian Capital Territory, Tasmania, and South Australia, the buyer is responsible for any damage to the property during the settlement period
In Western Australia and the Northern Territory, the buyer is responsible for insurance on the property in one of two ways: on the date the buyer is entitled or given possession (e.g., inheritance or a divorce settlement) or on the date that the total purchase price is paid as part of a settlement, whichever comes first

Despite the varying insurance requirements by state, it is recommended to arrange home insurance once the deposit is paid. This ensures that your financial interest in the property is adequately covered and provides you with peace of mind as a homeowner.

How to Compare Homeowners Insurance

Choose the Right Deductible

Homeowners’ insurance policies typically offer deductibles ranging from $500 to $1,000. While opting for a higher deductible can lower your premium, carefully weigh the risk versus the reward. You don’t want to choose a deductible you can’t afford to pay if you need to file a claim.

Bundle Your Insurance Policies

You can often save money by purchasing your home and auto insurance policies from the same provider. However, comparing quotes from multiple companies ensures you get the best deal.

Protect Your Home

Many insurance companies offer discounts for taking extra precautions to secure your home. This can include installing security systems, smoke alarms, storm shutters, reinforced building materials, and more.

Take an Inventory of Your Home’s Contents

Keeping a detailed inventory of your possessions and their value can help you determine the coverage you need without overpaying for insurance. If you no longer own particular items, cancel any endorsements or additional coverage you purchased to protect them.

Maintain Your Property

Keeping your home and property well-maintained can help reduce the likelihood of filing a claim and keep your premiums low.

Shop Around

Don’t be afraid to compare quotes from multiple insurance providers. However, don’t make the mistake of choosing a policy solely based on cost. Consider the provider’s reputation and customer service, as you’ll want a reliable and responsive partner in the event of a claim.

If you are considering purchasing a new home, obtaining home insurance coverage as soon as possible is essential, ideally before you move in. This will ensure that your home is protected from any unexpected events that may occur before you can secure coverage.

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