Home insurance: why you need it and how to pick the right provider

Home insurance: why you need it and how to pick the right provider

The recent flooding in Queensland and NSW has shown just how unpredictable life can be. If the events of the past few years have taught us anything, it’s that we need to be prepared for the unexpected.

Home insurance protects your home against damage, theft, or injury. However, choosing the right level of cover can be overwhelming, particularly if it’s your first home.

In this post, we explore what home insurance is and why you need it, as well as considerations to keep in mind when taking out home and contents insurance in Australia.

What is home insurance?

Home insurance covers you financially in the event that something unexpected happens to your property. 

Depending on the type of insurance you take out, this could include:

• the cost of repairing any exterior or interior structures in your home or rebuilding your house entirely
• loss or damage to an investment property
• loss of items due to damaging events such as a flood, storm or fire. 

Home insurance only covers the building itself, which means you won’t be covered if any of the items within your house are stolen, lost or damaged. However, many providers also offer home and contents insurance packages that include personal belongings and household items.

Do I need home insurance in Australia?

Home insurance isn’t a legal requirement in Australia, but some lenders may require you to take out insurance as a condition of your home loan. Most conveyancers and solicitors will also be likely to recommend that you take out insurance after signing the contract. 

When do I need to take out home insurance?

The point that you need to take out a home insurance policy depends entirely on the state or territory that you live in. Different states and territories have varying laws that state when a buyer becomes responsible for damage to the home building:

• NSW and VIC: The buyer is responsible for any damage to the property from the settlement date.
• QLD: The buyer becomes responsible for any damage to the property from 5pm on the next business day after both parties sign the contract.
• WA and NT: The buyer becomes responsible for the property either on the date that they’re given possession or on the date that the full purchase price is paid, depending on which comes first.
• SA, TAS and ACT: The buyer is usually responsible for any damage caused during the settlement period. As such, buyers need to take out an insurance policy before exchanging contracts with the vendor. 

4 considerations when taking out home insurance

1. Compare quotes from different lenders

It’s always good practice to obtain quotes from multiple insurers to find the right policy for your needs. You can either choose to use a comparison website or speak to the insurer directly to obtain a quote for your home insurance.

2. Don’t just look at price

Price matters, but keep in mind that cheaper insurers may offer less coverage than more expensive ones. When comparing quotes, don’t just look at the premium. Consider the following:

• Excess: How much will you have to pay to make a claim?
• Exclusions: Which items or events aren’t covered under your policy? Are there any caps or limits?
• Cover limit: What’s the maximum amount you can claim for certain items?
• Extra features: Do you get legal liability cover? Is there an option for extended coverage?

3. Make sure you’re not underinsured

When you’re taking out insurance for your home, you want to make sure that you have the right level of coverage for your needs and financial situation. 

There are two types of coverage available: 

• Sum-insured cover, which is an estimate of how much it would cost to rebuild your home in the event it was totally destroyed.
• Total/complete replacement cover, which covers the cost to repair or rebuild your home to the way it was.

Naturally, total replacement cover is more expensive. However, you’re less likely to be underinsured for the cost of rebuilding your house compared to sum-insured cover.

4. Regularly review your insurance provider

Just like refinancing your home loan, it pays to regularly revisit your options. Your needs may be different, you may have made changes to your property, or there may simply be a better deal available on the market.

When it comes time to renew your policy, investigate all the options on the market and obtain new quotes from providers to see if they offer something your insurer doesn’t. Remember to also check with your insurer and see if they have any policies for loyal customers.