Often the most important decisions in life are the ones that will have a big impact on your future. Some of these life changes include occasions like a career change, or a move overseas. But there’s one decision that trumps these events: buying a house.
Choosing which house to buy requires intense deliberation over location, pricing, size and décor. But remember, the big decisions aren’t over once you hold the keys in your hand. One thing you definitely shouldn’t overlook when it comes to this protection is the importance of home and contents insurance. The responsibility is yours to ensure your home is protected from theft, damage, or outright destruction. It’s especially important to organise insurance as soon as your family is moved into your new home – the sooner, the better!
While they are often sold as a package, home insurance and contents insurance are actually two separate kinds of cover. In this guide, we look at…
Home insurance for happy homeowners
If you’re renting, the cost of insuring the house is typically borne by your landlord. Home insurance becomes much more important as a homeowner though. Sometimes, it’s a prerequisite for getting a mortgage in the first place!
But even if it’s not, insurance provides a financial ‘safety net’ if you’re worried about property damage. No one else will fork out money to pay for costly repairs to your property … but an insurer can.
Home insurance policies can cover a variety of different circumstances, so it’s worth sitting down and thinking about the kind of protection you’d like. If you’re confused about the level of cover you need, ask your insurer. Shoot them as many questions as you need to feel comfortable about the product you’re buying.
For example, your policy might cover natural disasters like storm damage and bushfires, but perhaps not flash floods. This extra may cost you more each month. This is something to try and spot in your Product Disclosure Statement (or PDS).
Even if your property isn’t prone to particular events, you’ll want to make sure you have adequate cover anyway. Always expect the unexpected.
It’s also a good idea to find out if your policy covers supplementary costs, such as home repairs or rebuilding costs. These expenses can include such things as
- alternative accommodation (if the house is in an unliveable condition),
- removal of debris, and
- architectural work.
What’s the difference between sum-insured and total replacement?
There are two options for insuring your home: total replacement cover, or sum-insured cover.
- Total replacement cover looks after costs to restore your home to its original condition before the event that caused the damage.
- Sum-insured cover reimburses you with a set limit. It’s important to make sure that you get this value right. Why? Because if repair cost balloon and you’ve undervalued your home, you will be out of pocket in the event of a claim.
When calculating the value of your home, remember to exclude the cost of the land that its built on, but include
- the cost of the building,
- internal fittings and fixtures (such as taps and faucets, kitchen cupboards, vanity units, light fittings, floor tiles, linoleum), and
- structural improvements (such as an in-ground swimming pool, awnings, pergolas, decks, fencing and tennis courts).
It’s a good idea to get advice when calculating your sum-insured value because building costs are impacted by many things you may not expect.