When should you buy home insurance?

When should you buy home insurance?

Home insurance needs differ for everyone, so when should you get home insurance? Follow this checklist and learn about home insurance in Australia. 

Is it the right time for you to buy 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 about buying insurance, or even whether they need it in the first place.

While you can abundantly find home insurance quotes online, deciding whether to purchase insurance can require considerable research. Fortunately, RateCity has provided a set of questions that may help you determine whether it is the right time to buy homeowner's insurance. 

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

There are many Australians who take out a mortgage to buy their homes. It's not unusual for banks or lenders to require homeowner's insurance as it helps guarantee the cost of their financing overall.

It's great for you, but home insurance can be a factor in settling a home purchase. 

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

You should know the risk of damage to your new home before you start to settle in. Typically, you'll want to do some research about any risks associated with where you're moving to, but if you haven't, quickly search what's happened online, or even ask neighbours.

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 get you familiar with the neighbourhood. Alternatively, make a call to your local council to get a gauge on what you can expect. Some areas may be more disaster-prone than others and can add to your cost of living. 

Home insurance is practically a necessity for any homeowner and may be required by the terms of your mortgage agreement. Insurers may suggest or require you to purchase customised flood or fire damage insurance, in addition to a regular home insurance policy.

Are you buying an established dwelling?

Also called an "old home", an established dwelling brings with it a sense of history and perhaps also a housing style that may not be found in new constructions. You can typically find these across Australia, and it's not unusual to buy a home that has been passed down for generations. 

However, those generations may not have been kind to the structure, and older homes need to be inspected thoroughly to ensure that previous owners have not shirked on maintenance. All maintenance inspections should be done before signing the contract to your new home to give you the lay of the land - your land in fact. 

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 the flaws once the deal is made, and have to deal with any repercussions. Insurance providers may not cover damage arising from gradual wear and tear. However, it's still important to cover a home all the same. Consider talking to your home insurance provider to find out what your cover entails. 

How many 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, or even little bits and pieces collected from the family over the years, everything you own inside your home holds a value, and these should be protected from theft or damage.

Contents insurance allows insurers to protect the things inside your home from both theft and damage, allowing you to place a broad dollar figure value over what you own collectively, helping you to replace it if the worst does happen.  

Are you renovating your new home? 

Like most things, change is a fact 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 highly likely. Renovations are a part of life as a homeowner, so is upgrading the things inside the home. As such, you may need to buy additional coverage or revise your existing policy, ensuring that your home and valuables have the right level of home insurance.

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Learn more about home insurance

Do I need home insurance for a home loan?

While home insurance isn’t necessarily a requirement for a home purchase per se, it’s likely that if you’re purchasing a home with the help of a home loan, you’ll need to take out home insurance on the property. Home insurance can be one of the factors required in the pre-settlement documentation for a home purchase, and you may be advised by either the bank or a broker (or both) ahead of settlement.  

What is a home insurance premium?

Your home insurance premium is what you pay your insurance provider for covering your home under their home insurance policy. It is calculated based on the type of coverage you choose for your home as well as any additional coverage you buy for either your possessions or specific incidents. Your premium can either be paid annually or in smaller instalments. 

Your home insurance policy may cover the total replacement cost, which is the actual expense of rebuilding your home from scratch. Alternatively, it can cover an insured sum, which is a predetermined estimate of what it might cost to rebuild your home. You’re more likely to pay a higher premium for total replacement cover than for insured sum coverage.

Apart from selecting your coverage, you’ll have to figure out your excess, which is the amount you pay out of your own pocket for each insurance claim. If you are okay with paying a higher excess, your insurance premium may be lower. Conversely, if you choose a lower excess, you may pay a higher premium. 

Your insurance premium can also be higher if you live in an area prone to incidents like floods, bushfires, or theft, as insurers are more likely to receive a higher number of claims in such neighbourhoods. 

If you also want to buy insurance for your belongings, a combined home and contents insurance policy may have a lower premium than paying premiums on separate policies for your home and your belongings. 

What does home insurance cover?

What home insurance specifically covers and the extent of the coverage depends on the insurance provider and the individual policy. However, home insurance typically covers the property and other permanent structures found on or in the property, such as fences, in-ground swimming pools, garages, and dishwashers, to name a few.

There are usually two types of homeowner's insurance you can choose from, with "total replacement cover" or "sum-insured cover". 

If you’re not sure which option to take, it may be worthwhile to speak to a professional valuer to understand how much it might cost to rebuild your home and replace what's inside.

Do I need home insurance?

While homeowners' insurance is not legally required, it’s an option for those who want financial protection for their property. Some mortgage lenders may even require borrowers to take out home insurance.

Is hail damage covered by home insurance?

If storms are among the incidents covered by your home insurance policy, hail damage protection is more than likely assured. While all policies differ based on your needs and what a home insurance provider will offer, some things are close to a certainty. 

Extreme weather events tend to be unpredictable in their severity, but dangerous all the same. You'll never be able to fully prepare for any damage caused, be it lightning, strong winds, rain leading to flooding, or hailstorms, but home insurance can at least provide you with a way to deal with life's unpredictable nature. 

If your home suffers from hail damage, you can file a claim with your insurer. In the event that this happens, remember to take pictures of any hail damage as an insurance adjuster will need to evaluate the impact on your home. Any additional wind damage to your roof will also need to be documented similarly.

You may want to check if your home insurance also covers hail damage to the cars parked on your property, and then file the claim for the total damage caused by the hailstorm. Once your claim is approved, your insurer should offer you either a cash settlement or refer you to a network vendor for the necessary repairs.

What is home insurance?

For homeowners, home insurance can provide some financial protection to your property when things don’t go as planned. If you have home insurance and your property is damaged (or even the permanent fixtures inside), you could make a claim to your insurer to cover the costs of getting it fixed, replaced or rebuilt.

The idea behind property insurance is that you pay insurance providers to take on the risk of loss or damage to your property that you would otherwise be carrying. 

Are bikes covered under home insurance?

Ordinarily, home insurance only covers damage to your house, which can include additional buildings such as garages, sheds, and fences, as well as permanent fixtures. 

However, to protect the items located in your home or in any of these other buildings, you will likely need to purchase home and contents insurance. Even so, your bike would only be covered if it does not require separate vehicle registration, as is the case for bicycles and 50cc minibikes, but not motorcycles, and only when located on your property, parked or otherwise. 

Depending on the cost of your bicycle or minibike, you can have it listed in your home and contents insurance as a high-value item. You'll want to check your insurer’s Product Disclosure Statement (PDS) to know the normal coverage limit for a bike included as part of your home and contents insurance, as well as the incidents which are covered. 

Insuring your bicycle can be distinct to insuring any personal effects on your bike at the time, or even using the bike when you're out and about. If you want to cover those, such as something in a basket or a camera equipped to the bicycle, or the bike itself as you travel, you will likely need to purchase additional personal effects insurance. You can also read about any additional coverage available under the personal effects policy, though for full coverage, an ideal option will likely be a separate bike insurance policy.

How do you compare home insurance rates?

When you compare the home insurance quotes offered by various Australian insurers, consider looking at the type of coverage they offer as well as coverage limits and exclusions. You can choose an insurance policy which covers either the total replacement cost, which is the actual cost of rebuilding your home from scratch, or a fixed insured sum, which is an estimate of the cost to rebuild. The home insurance policy is likely to cost you more if you go for the total replacement cost coverage.

Your insurance policy’s exclusions and coverage limits usually depend on how exposed your home is to adverse events like floods and bushfires. It also tells you the maximum compensation that your insurer is likely to pay for damage caused to your home. If you live in an area with a greater incidence of crime or disasters, your insurance policy will likely cost you more.

The amount you actually pay for home insurance can be adjusted by agreeing to a higher excess, which is what you will pay over and above the insured amount from your own pocket. You should consider using the online calculators provided by various insurers to check how different coverage limits affect your insurance premium.

Does home insurance cover termite damage?

It is unlikely that the average home insurance policy will cover damage caused by termites, mice, or other vermin, which are typically the result of negligence. For instance, water may have seeped from a heater or washing machine and dampened the woodwork in your home, attracting termites. Since termites usually build colonies, you’ll need to deal with the existing infestation and also take preventative steps to prevent future termite damage.

Treating your home for termite damage can be quite expensive, and you’ll likely have to make significant repairs depending on the size of the infestation. You may want to check if your neighbours have also had termite damage issues, and consider taking more long-term measures to keep termites away.  For example, you could install a chemically-treated soil barrier or baiting station, both of which may be effective for a few years. 

Consider inspecting your home  for any leakage or seepage from time to time, especially in the flooring or the outer edges of your home, as a precaution against damage by vermin. You may also want to consider hiring a pest control professional who can inspect and treat your home to protect against termites.

How much is home insurance?

How much your home insurance could cost and the amount of premiums you pay will depend on many factors, including the amount you need to cover, the excess you're willing to pay, and what type of cover you want to take. 

It's important not to base your insurance policy decision solely on the premiums being charged, reviewing what the policy covers, its features, claim exclusions, and caps when deciding which home insurance policy is the right one for you.