All About Home Insurance and Choosing the Right One

Feb 7, 2019 | Finance

You’ve probably heard that you should take out a home insurance policy to cover your investment in a property, whether it’s a starter or forever home. However, with so many policy options out there coupled with technical jargons getting one can be a confusing affair.

Of course, it doesn’t have to be that way and doing a bit of research will help make things clearer. To put you track to choosing the policy that works best for your needs, we’ve outlined what you should know about insuring your home in Australia and choosing the right product for you.

Home Insurance Explained

Put simply, home or building insurance insures you against the cost of rebuilding or repairing your property when the property is damaged in circumstances outside of your control. For example, the consequences of natural disasters such as floods and storm damage from severe weather.

When you take out home insurance, it’s often a good idea to take out contents insurance as well to protect the items inside your home. It’s often possible to “bundle” home and contents insurance together for the home you own and live in. However, when it comes to insuring an investment property you only want insurance for the building as the contents isn’t yours.

Do I Really Need Home Insurance? 

Whether you’re protecting your investment property or your own home, the short answer is yes. The average house price in Australia now exceeds $600,000, and it’s comforting to know that your financial investment in the property is protected should accidents happen.

Chances are, your home is either the most valuable asset you own or you’re at least committed to paying a sizable home loan each month. Failing to insure your home and its contents is arguably a waste of your investment. That’s why it’s important to discuss your options with experts who understand the property market.

Home Insurance in Australia

The costs of taking out home insurance vary from state to state depending on risk factors associated with each state. For example, in North Queensland where cyclones are becoming increasingly common, you might pay around $1,565.98 annually for home insurance. However, premiums in New South Wales are falling year on year, and the average annual cost is only $554.22.

While you can’t control the weather, you can control who you take out an insurance policy with and it pays to shop around. Research shows that the cost of insuring the same property can vary by up to $1,100, depending on the insurer.

Home Insurance Policies

The basic home or building insurance policies available are total replacement cover and sum-insured cover.

Total replacement cover covers the cost of rebuilding your home to the condition it was in before the intervening event (such as a storm or flood) took place. Total replacement cover is less common, because it’s more expensive for the insurer.

Sum-insured cover insures you up to a pre-agreed amount. Although it is more common, the repair costs often exceed how much your home is insured for, meaning you’re still out of pocket.

Whatever insurance policy you choose, they have some things in common. Most policies will, but not always, insure you for damage caused by:

  • Earthquakes, floods, and tsunamis
  • Fire damage and explosions
  • Storms and lightning
  • Theft and vandalism
  • Damage from liquids (e.g. burst pipes)

Some policies also cover you for accidental damage (e.g. a broken window). However, it is extremely important to ask and double check that these are all included in your cover.

Choosing the Right Level of Cover

The biggest concern you’ll face when choosing a home insurance policy is making sure that you’re sufficiently insured for your needs. The Australian Securities and Investments Commission (ASIC) notes that you’re under-insured if your insurance covers less than 90% of the predicted rebuilding costs. Online calculators are available to help you identify the total amount you should be insured for.

Getting the Best Premium

There are a few things you can do to secure an affordable and comprehensive insurance policy for your needs:

  • Combine building, contents, and other insurance. Many insurers offer reduced rates for taking out more than one policy with them.
  • Don’t simply renew your policy. Insurers often offer discounts for new customers.
  • Vary the excess rate. A higher excess often means cheaper premiums, so it depends on what matters to you.
  • Get multiple quotes. Insurers will try to outmatch each other.

Don’t Be Lazy and Look Around 

If you don’t have sufficient home and/or contents insurance, you’re wasting money on a policy that’ll cost you extra in the long run, because you’ll be out of pocket for repairs if something should happen. And if you don’t shop around, chances are you’ll end up paying far more than you need to for the same level of cover you could get elsewhere. Most importantly, take your time and ask all the questions you need to make the right decision.

How Clever Finance Solutions Can Help

Getting insurance is an important part of owning property, and Clever Finance Solutions can help you make the right decision. We have built a strong relationship with a vast network of professionals who can assist you in your property journey, may it be in securing the right loan, getting property management help, or choosing the best home insurance policy. Please don’t hesitate to get in touch with us if you want to know more or have any questions.

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