What Insurance Should Home Buyers Buy?

What's next after buying your home? What do all buyers need to look at, after successfully buying your homes?

Yes, that's right. Home buyers should review their insurance requirements immediately after a purchase. From your personal insurance, life insurance, income protection, total permanent disability insurance, and, of course, the appropriate property insurance for your newly bought homes or investment properties. With so many variations of home, property insurances in the market, which ones are the best? What should you look for? And how do you find the best insurance for your?

Before we proceed, here is the mandatory disclaimer. This article is meant as general advice only. It is not any form of financial advice, and does not take into account your own personal circumstances and your own personal needs. You should always seek qualified financial and insurance needs advice from a licenced financial advisor or insurance broker, to determine if the right type of product and the right level of cover suitable for you.

With the disclaimer out of the way, let's start.

The Basic Property Insurance

Now, let us look at the basic property insurance. The very basic ones are the home and content insurance.

What is a Home Building Insurance?

Home Building insurance covers the cost of repairing or replacing the physical house when something goes wrong. When buying home insurance, price is important, but more importantly, you should focus on what you need, and what is (and isn't) covered by the policies from the various insurers.

Home insurance covers the building itself and the fixtures, for example, plumbing and built-in cabinetry. It can also cover legal costs if someone is injured on your property.

What is Content Insurance?

Contents insurance covers household items and personal belongings, such as furniture, televisions, clothes and jewellery. This can be bundled as home and contents insurance.

What is Home and Content Insurance?

As the name suggests, Home and Content Insurance is combines both the Home Insurance and Contents Insurance into 1 single insurance policy. It covers both the building and household and personal contents in the property. Most insurers who offer home insurance would have a combined home and content insurance policy, often, at a slightly better price.

What is Landlord Insurance?

Landlord insurance is specifically designed to protect those who own investment properties. Landlord insurance covers any event that may affect investment such as theft, storm damage, or tenants not being able to pay their rent. Some landlord insurance policies include a combination of some elements of landlord insurance, building insurance, and contents insurance to cover the costs of loss of rental income, property damage, and damage to what is inside the property.

What is Title Insurance?

You might not have heard of this Insurance, but it can be useful especially if you are buying an established property. Title insurance is a policy that could protect you from unknown property ownership risks that threaten your right to occupy and use your land. Eg, if there was an unapproved modification to the property which you had bought, Title Insurance can help cover the cost of rectifying the unapproved modification.

What do you need to know when you buy Home Insurance?

Before you buy your home insurance, you will need to know a few things:

1. Replacement value - This is the cost to repair or rebuild your home to the same standard.

2. Construction of your home - year it was built, structure, is it s full brick house, brick veneer,

3. Excess - this is the "co-payment" you need to pay, in an event of a claim.

4. Flood - double check if cover for flooding is included, and read the definition of flood. This varies between insurer to insurer. Some default policies do not include flood cover, by default, to give you an impression of low premiums. Also confirm their definition of what a "flood" is. When your property is flooded, your insurance might not cover it, even if you have flood cover, if, its definition of flood does not tally with the situation. Some policies covers water damage as long as there is water on the floor. But some policies went as far as defining what caused the water problem, natural weather events and events caused by human actions might be treated very differently.

5. Exclusions - what is excluded in the insurance. For most, acts of war / terrorism is excluded, some cheaper insurance went as far as excluding acts of god, such as freak weather events, etc.

6. Always read the product disclosure statement (PDS) - Read and understand the definitions of various terms. Your idea of what and how it should be cover can be very different from the insurers' definition of what they will cover.

What do you need to know when you buy Content Insurance?

Before you buy your content insurance, you will need to know a few things:

1. Replacement value - This is the cost to repair or rebuild your insured content to the same standard

2. Excess - this is the "co-payment" you need to pay, in an even of a claim

3. Loss - read the definition of loss. This varies between insurer to insurer. What you think might be a loss, might not be a loss, if it does not meet the insurer's definition of loss

4. Exclusions - what is excluded in the insurance. For most, acts of war is excluded, some cheaper ones went as far as excluding acts of god, such as freak weather events, etc.

5. Portable devices - Some home content insurance covers portable devices, such as mobile phones, laptops, etc, in the event you lost it, even if you are outside your home.

6. Motor fusion - no, this is not some magical energy device. This covers events when the motor in your electrical devices (fridge, air condition) malfunctions.

7. Always read the product disclosure statement (PDS) - Read and understand the definitions of various terms. Your idea of what and how it should be cover can be very different from the insurers' definition of what they will cover.

What do you need to know when you buy Landlord Insurance?

Before you buy your landlord insurance, you will need to know a few things:

1. Excess - this is the "co-payment" you need to pay, in an even of a claim

2. Rental Loss - read the definition of loss. This varies between insurer to insurer. What you think might be a rental loss, might not be a claimable, if it does not meet the insurer's definition of rental loss.

3. Exclusions - what is excluded in the insurance. For most, acts of war is excluded, some cheaper ones went as far as excluding acts of god, such as freak weather events, etc.

4. Always read the product disclosure statement (PDS) - Read and understand the definitions of various terms. Your idea of what and how it should be cover can be very different from the insurers' definition of what they will cover.

What insurance do you need?

The type of insurance you need depends on your situation. This table summarises the minimum you will need, depending on whether you are a home owner, landlord or renter:

	Home Insurance	Content Insurance	Landlord Insurance
Home owner	yes	yes
Landlord			yes
Renter		yes

What do you need to know when shopping for insurance?

With so many insurers offering home, landlord and content insurances, what do you need to know before you buy one? First, get quotes from more than one insurer. They are usually free. Find the best value and coverage that suits your needs. Compare the Key Fact Sheets of different policies. If you want more detail, read the product disclosure statement (PDS).

There are some comparison websites which claims to help consumers choose the right insurance, but do be aware that they are businesses and may make money through promoted links. They are like insurance brokers, their advice might not be 100% neutral, and may be influenced by promotions, commissions and rebates from the insurance providers. They also do not compare ALL the available insurances in the market, thus, you might miss out of better ones, simply because they do not have any commercial referral agreements with these comparison websites. So, keep these in mind when using comparison websites.

After receiving quotes from the insurers either directly or via the comparison websites, compare these key features:

Premium	Cost for similar cover
Excess	Amount you have to pay when making a claim Options to reduce your premium, usually by paying a higher excess Options to reduce your excess, usually by paying a higher premium
Exclusions	Items and events not covered Check for exclusions, caps, limits or other conditions Check for definitions of the events in the Product Disclosure Statement
Legal Liability Cover	Cover for injury to other people and their properties at your home. Some insurer might call this Public Liability Insurance
Extended Cover	Adds extra to the sum-insured so you're not underinsured if there’s a total loss
Cover Limits	Maximum limit on how much you can claim for covered items
Definitions	​Definitions of various events and terminologies
Flood and Natural Disaster Cover	Read and understand the definition of flood, water overrun, etc. Different insurers have different definitions for flood and water damage. Some may call this "acts of God".

Now that you have a better idea of what to look for when shopping for your home, content or landlord insurance, it's time to start shopping.

Have a chat with our buyers advocates if you have any queries. While we are not able to provide any specific insurance advice, we know professional insurance brokers who are able to help you find the best cover for your needs.

More home and investment property buying news and tips here.

Disclaimer:

This article is meant for general consumption only. It is not in any ways a financial advice, and does not take into account your own personal circumstances. You should always seek qualified financial and insurance needs advice from a licenced financial advisor or insurance broker, to determine if an insurance product is suitable for you.