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New home insurance - what do you need to know?

Mark Bristow avatar
Mark Bristow
- 4 min read
New home insurance - what do you need to know?

Purchasing a new home is exciting, but can also be a busy time. One of the most important things you’ll need to do after purchasing a property is to organise insurance. 

There are many reasons why home insurance is important - insurance can give you peace of mind, protect you financially if your property is damaged or destroyed, and it might even be a requirement of your home loan.  If you’re considering purchasing a new home, it’s important to know about new home insurance, including what it does and does not cover. 

What is home insurance?

Home insurance policies are designed to protect homeowners against a variety of risks, and provide you with either repairs, a payout or even a completely rebuilt home if yours is damaged or destroyed. Home insurance can cover you in a variety of circumstances, but it’s important to know when you will and won’t be covered, and what cover your household needs.

What does home insurance cover?

  • Structural damage to your home: Most home insurance policies cover your home’s structure if it is damaged or destroyed due to an ‘insured event’, such as a fire, storm or burglary.
  • Civil liability: If someone is injured on your property, your home insurance cover may help pay for legal expenses or medical bills.

Many home insurance policies in Australia work on a ‘sum insured’ basis. This is where your premiums are based on an estimate of how much your home would cost to rebuild if it was totally destroyed. 

Some insurance providers in Australia offer ‘total replacement cover’, which covers the cost of repairing or replacing your home to the exact standard it was before being damaged or destroyed. This cover tends to be less common and more expensive. 

What does home insurance not cover?

It is important to read the fine print of any insurance policy - including the product disclosure statement (PDS) and any other policy documents, so you’ll know exactly what you’re covered for with your new home insurance. 

How much does home insurance for new homes cost?

The cost of home insurance can vary based on several factors, including: 

  • Your home’s value;
  • Your home’s estimated replacement cost;
  • Your home’s location, and;
  • The level of coverage chosen. 

Home insurance is likely to cost a minimum of $1,200 annually, and can cost several thousand depending on the location of your home. 

High-risk areas, particularly those prone to natural disasters or with high crime rates, may see higher premiums. For example, in North Queensland, an area prone to flooding, home insurance can cost up to $5,923 annually. 

When taking out home insurance, you can nominate an excess, which is an amount that you pay when you make a claim, before getting your payout. Opting for a higher excess can mean lower insurance premiums, but it's essential to balance this with the potential out-of-pocket costs in the event of a claim.

When should I take out my home insurance policy?

It's often wise to secure a home insurance policy before finalising the purchase of your new home. In many cases, mortgage lenders require proof of insurance before settlement to protect their investment before they’ll provide final home loan approval. This preemptive step ensures that your property is protected from the moment you become legally responsible for it, offering immediate peace of mind.

How does my suburb affect my home insurance premiums?

Your new home’s location can play an important role in determining your home insurance policy terms and costs. Insurers consider factors such as the area's risk of natural disasters, crime rates, and even the proximity to emergency services. Homes in areas with higher risks or historical claims may face higher premiums or stricter policy terms. It's beneficial to research and compare insurance options based on your specific suburb to find the most favourable terms.

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Product database updated 16 Jun, 2024

This article was reviewed by CEO Paul Marshall before it was published as part of RateCity's Fact Check process.