Insuring Your Home: A Must Or A Choice?

While home insurance is not a legal requirement, it is still necessary to protect your property and finances in the event of damage or loss. In most cases, you will become responsible for insuring your new home from 5 pm on the next business day after the contract date. This means that if something happens to your home during this period, you will have to pay for any repairs or replacements out of your own pocket.

The decision to take out home insurance ultimately depends on you. However, it is a risky move not to have one, especially if you live in an area prone to natural disasters or if you have a mortgage, as your lender may insist that you get insurance.

Home insurance isn't a legal requirement but lenders may insist on it

Home insurance is not a legal requirement, but it is still a good idea to have it. While it is not mandatory, your lender may insist that you take out home insurance before giving you a home loan. This is because home insurance covers the cost of repairing or replacing your house when something goes wrong, and lenders want to protect their investment.

Home insurance covers the building itself and fixtures like plumbing and built-in cabinetry. It can also cover legal costs if someone is injured on your property. Contents insurance, on the other hand, covers household items and personal belongings, such as furniture, televisions, clothes, and jewellery. This can be bundled with home insurance if you want to insure your belongings as well.

The amount of home insurance you need will depend on the cost of rebuilding your home in the event of a total loss. There are two main types of home insurance policies: total replacement cover and sum-insured cover. Total replacement cover includes all costs to rebuild your home to the same standard before any damage occurred, while sum-insured cover is where you specify the amount of coverage you want when taking out the policy. Sum-insured cover may not fully cover the cost of rebuilding, so it is important to calculate this cost accurately.

When deciding on home insurance, it is important to understand what the policy covers and compare different policies to find the best value and suit your needs. You should also consider the location of your home, as this will affect your premium and what optional covers you can apply for.

In conclusion, while home insurance is not legally required, it is important to have it to protect your financial interests and give you peace of mind. Lenders may insist on it, and it can save you from costly repairs or replacements in the event of damage to your home.

You can choose when to take out home insurance, but you may be liable for damage during the settlement period

Home insurance is not a legal requirement, but it is highly recommended. It covers the cost of repairing or replacing your house when something goes wrong, including damage to the building and its fixtures, and can also cover legal costs if someone is injured on your property.

When it comes to taking out home insurance, you can choose when to do so. However, it's important to note that you may be liable for any damage that occurs during the settlement period. The settlement period is the time between signing the contract and the final payment of the contracted amount. During this time, the responsibility for any damage depends on the state or territory you live in.

In the Australian Capital Territory, South Australia, Tasmania, and Queensland, the buyer is typically responsible for any damage from 5 pm on the next business day after both parties have signed the contract. This means that if you are the buyer, you should have your insurance sorted before the exchange of contracts to avoid paying for any damage out of your own pocket.

In Victoria and New South Wales, the buyer becomes responsible for any damage from the settlement date. However, it is recommended to get insurance from the time the contract is signed to be on the safe side.

In Western Australia and the Northern Territory, the buyer assumes responsibility on the date they are given possession of the property or the date the full purchase price is paid, whichever comes first.

While it's not a legal requirement, your mortgage lender may also expect you to have home insurance in place before settlement. Additionally, if you have a mortgage, your lender can insist that you take out home insurance.

To summarise, while you can choose when to take out home insurance, it's important to be aware of the potential risks and liabilities during the settlement period. To avoid being liable for damage, it's advisable to have insurance in place as early as possible, preferably before exchanging contracts.

Home insurance covers the building and fixtures, contents insurance covers belongings

Home insurance is not a legal requirement, but it is highly recommended by lawyers and conveyancers. It is also often insisted upon by lenders if you have a mortgage. Home insurance covers the building and fixtures, and contents insurance covers belongings.

Home insurance provides financial protection to homeowners in the event of damage or loss to their private residence and its fixtures. This includes damage from fire, smoke, wind, falling trees, hail, and theft. Fixtures are defined as permanent structures on your property, such as garages, sheds, fences, decks, and solar panels.

Contents insurance, on the other hand, covers your household items and personal belongings if they are damaged, lost, or stolen. This includes furniture, clothes, computers, fridges, televisions, tools, and jewellery. Contents insurance can be bundled with your home insurance, which is usually cheaper than having separate policies.

When choosing contents insurance, consider the value of your belongings and what you can afford to replace or lose. Most contents insurance offers the replacement value of your belongings, sometimes called 'new for old' cover, which can be more expensive. Some policies offer the value of your belongings at the time they are insured, which may depreciate over time.

It is important to note that most contents insurance does not include cover for accidental damage, and there may be exclusions for certain items such as portable items or valuable possessions like jewellery. Check the exclusions and limits of your policy carefully to ensure you have adequate coverage for all your belongings.

Calculate the cost of rebuilding your house to avoid underinsurance

When buying home insurance, you will often be asked to provide the rebuild cost of your home, sometimes referred to as the 'buildings sum insured'. This is the cost of rebuilding your home in its entirety, taking into account all materials and labour. It is important to distinguish this from the price you paid for your home or its current market value. Providing an accurate rebuild estimate will ensure your home is properly insured.

There are several ways to calculate the rebuild cost of your home. Here are some steps you can take:

• Get an appraisal: You can hire a professional appraiser to inspect your home and provide an estimate. An appraiser will be familiar with local building costs and ordinances that may apply in your area.
• Use a replacement cost calculator: You can use an online calculator to estimate the rebuild cost of your home. One such calculator is provided by the Building Cost Information Service (BCIS). Simply enter your email address and the external floor area of your property to get started. Keep in mind that this will only provide a rough estimate.
• Hire a chartered surveyor: If you live in a non-standard property, a listed building, or a home with unusual features, it is recommended to hire a chartered surveyor to provide a professional assessment. They will take into account the unique characteristics of your home and provide a more accurate rebuild cost.
• Review your home insurance policy: If you have recently bought your home, the rebuild cost should appear on your mortgage valuation or deeds. You can also find the rebuild value on your existing home insurance policy document or mortgage valuation report.
• Contact your insurance provider: Your insurance company may be able to provide an estimate of the rebuild cost based on factors such as the year your home was built, the number of bedrooms and bathrooms, and the materials used in construction.

It is important to remember that providing an accurate rebuild cost to your insurer is your responsibility. By following these steps, you can help ensure that your home is adequately insured and avoid the risks associated with underinsurance.

Location affects your premium and may determine optional covers

While home insurance is not a legal requirement, it is highly recommended by lawyers and conveyancers. Your mortgage lender may also insist that you have home insurance. The location of your house can affect the premium you pay for home insurance. For example, if you live in an area known for high traffic congestion, accidents, or theft, your insurance premium may be higher. This is because there is a higher probability of accidents or theft in these areas. Similarly, if you live in an area prone to natural disasters, such as flooding or bushfires, it is important to ensure that your house is adequately covered.

The cost of rebuilding your home is another factor that can vary depending on your location. Building costs can fluctuate from year to year and are influenced by construction demand, building materials, and labour costs. To ensure that you have sufficient coverage, you can use a building replacement calculator to estimate how much cover you need based on current industry data.

In addition to the location, there are other factors that can affect the premium for home insurance. The size of your home, the quality of fixtures and fittings, and the rebuilding costs are all important considerations. It is also crucial to regularly update your policy to keep it in line with any changes or renovations made to your home.

Frequently asked questions