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When should you buy home insurance?

Peter Terlato avatar
Peter Terlato
- 6 min read
When should you buy home insurance?

Home insurance needs differ from household to household, so when should you consider taking out a policy on your property? Consult our handy checklist to learn all about home insurance in Australia.

When do you need home insurance?

It's not surprising to learn that most Australians would prefer to own their own home rather than rent perpetually, making homeownership "the dream" for so many. However, while the desire to own a home is pretty clear, many homeowners are uncertain when it comes to insuring their real estate, or even whether they need it in the first place.

While you can find an abundance of home insurance quotes online, deciding whether to purchase insurance can require considerable research. Fortunately, RateCity has compiled a list of questions that may help you ascertain whether it’s the right time to buy homeowner's insurance for your property.

Will you be taking out a mortgage to buy the house?

Many Australians take out a mortgage to purchase their homes. It's not unusual for banks or lenders to require that borrowers also purchase homeowner's insurance, as it helps to guarantee the cost of their financing.

Therefore, home insurance can be a critical factor in settling a home purchase. Be sure to check with your lender or broker to find out what specific conditions are required to secure your mortgage.

Is your home in an area prone to bushfires, floods, or other extreme events?

You may have purchased your home in a location that’s ideal for your household needs, such as proximity to your workplace, local shops, public transport or schools. However, you may not have factored in the potential for natural disasters or vandalism, which can be a concern among insurers when allocating policies.

Given that home insurance is practically a necessity for any homeowner and may be required by the terms of your mortgage agreement, insurers may also suggest or require you to purchase specific types of insurance, such as flood or fire damage insurance, in addition to a regular home insurance policy based on the proclivity for certain incidents in your area.

It’s really important that you are aware of whether or not your home is at risk of damage before you decide to purchase any insurance. Typically, you'll want to do some historical research concerning the potential for weather-related risks in the area where you're buying.

You can do this by jumping online and reading up about recent natural disasters that occurred, asking your real estate agent for information or even politely inquiring with locals in the neighbourhood. You may be surprised by what you learn through a brief discussion.

If you're new to the area, a quick chat with a local will not only give you an idea of what you should be on the lookout for but may also help you to familiarise yourself with the area. Alternatively, make a call to your local council to get a gauge on what to expect when it comes to the potential for weather damage. Some areas may be more disaster-prone than others and this can add to your ongoing maintenance costs as well as insurance premiums.

Are you buying an established dwelling?

Also called an "old home", an established dwelling can bring with it a sense of history and, in some cases, a housing style that may not be found among new constructions. Australia has plenty of old homes and it's not unusual to find a home that has been passed down through the generations.

What you need to be careful of is the fact that time may not have been kind to the structure and integrity of the property. It’s sensible to organise a thorough inspection before you buy to ensure that the home is stable and safe, and that previous owners have not shirked on their maintenance duties. All inspections should be conducted and evaluated before signing the contract to your new home to give you a proper overview.

In most states, the risks associated with the property transfer to the owner either immediately or on a date explicitly mentioned in the contract. This means you will likely inherit any flaws once the agreement has been made, and have to deal with any potential repercussions. Insurance providers may not cover damage arising from gradual wear and tear. However, it's still important to secure coverage for your home all the same. Consider talking to your home insurance provider to find out what’s included in your policy.

What valuables do you own? 

We all own lots of different things that have value in our lives. Whether it’s a TV, computer, jewellery, clothes, bikes, or even little bits and pieces collected from family inheritance over the years, everything you own inside your home holds a value, and these items should be protected from theft or damage.

Contents insurance allows homeowners to protect the valuables inside their home from both theft and damage. Generally, you’ll submit a broad dollar figure value over what you own collectively, helping you to replace your items if the worst does occur.  

Are you renovating your new home?

Like most things, change is a part of life. When you own a home, things may change, and over the time you've been living in your home, changes to the structure or what's inside are likely. Renovations are often necessary and you’ll also add to and replace the things that exist inside your home. As such, you may need to purchase additional coverage or revise your existing policy to ensure that your home and valuables have the right level of coverage.

How to buy home insurance

Buying home insurance can be a confusing process, especially if you’ve never done it before. You need to compare policies from different providers to understand what is included and what isn’t, and to what extent. Insurers use terms like coverage, exclusions, and limits, which you need to understand in detail. 

You’ll also have to choose between a policy that covers your home’s total replacement cost and one that covers an insured sum. The cost of your home insurance policy may depend on your coverage amount and also on your excess, which is the percentage of each claim that you agree to pay. 

You may consider buying a combined home and contents insurance policy instead of standalone home insurance, especially if you are also planning to insure your valuables. A combined policy will usually cost you less than two separate policies. Irrespective of the cost, you should ensure that the policy you buy covers the things that matter to you and may affect your propensity to make successful claims.

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Product database updated 17 Jul, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.