Home Insurance – the difference between renting and owning
If you’ve rented in the past, it would have been the responsibility of the landlord to make sure the property was insured (that is, the actual property – not your personal belongings). With your own home however, the responsibility of protecting yourself from the unknown is yours – in fact, holding building insurance may be a requirement of your mortgage.
Working out what the right level of cover is for the first time can be somewhat daunting, so here are some of the main points to consider. It’s important you take the time to choose the right cover for your needs, so should you have any questions, make sure you get in touch with the insurer as many times as you need before settling on a policy.
Insuring your property with building insurance
Building insurance can provide cover for damage for your home and generally covers the main home, garage and other buildings on the property that can be locked up as well as built-in wardrobes, kitchen cabinets and plumbing (although exactly what is covered will vary depending on the policy so make sure you read the Product Disclosure Statement first).
What you are covered for will also vary depending on the policy, so it’s important to find a policy that covers the events you need to insure against. For example, most building insurance policies will cover theft, fire and storms, but not all policies will provide cover for flooding.
Over and above just providing cover to fix or replace damage to your home, should it be needed, you may also wish to consider whether a building insurance policy covers:
- Temporary accommodation if your home becomes unliveable.
- Emergency repairs to protect your home from further damage.
- Mortgage discharge fees if your home is a total loss.
Total replacement insurance or sum insured?
There are broadly two types of building insurance cover – total replacement and sum-insured:
- Total replacement covers all the costs to rebuild your home to the standard it was before it was destroyed (by a predefined insurable event listed in the PDS). A total replacement policy means you won’t have to worry about any shortfall to repair or rebuild your home.
- A sum insured policy provides cover up to a set amount to repair or rebuild your home.
A sum insured policy tends to have a lower premium (the amount you pay for your policy). However, should you choose this type of cover it’s important you make sure you’ve got enough cover to be able to rebuild your property.
What about what’s inside your home?
Building insurance covers the structure of your home – it doesn’t cover your belongings. In order to protect your possessions you need to take out a contents insurance policy.
Who is responsible for building insurance if your new home is a unit?
If your new home is part of a strata title complex (the majority of apartments and townhouses in Australia are strata title – check with the executive committee for your building or managing agent to confirm), the building will be covered by residential strata insurance (also known as body corporate cover). Although you won’t have to arrange the insurance yourself, you will contribute along with the other owners in your building through your building or strata levies. Some items such as kitchen cupboards, light fittings and even paint or wallpaper aren’t covered by strata insurance so check your contents insurance sum insured has allowed for these items as well.