At Insignia Homes, we love seeing families move into their shiny new house, and we want to make sure you’re covered if damage occurs (which it can, unexpectedly!).
Choosing the right insurance, and comparing your policy each year to make sure it’s still the best one for you, will give you peace of mind that you’re covered even if the worst should happen.
How does home insurance work?
You’ll need to take out home insurance (and possibly contents insurance) when you own a home. You pay an annual fee to an insurance company, and in return they’ll cover any damage to your house – for example, a tree falling through the roof or a kitchen fire.
There are lots of insurers and not all policies cover everything you might need, so it pays to do a little digging to find out which provider is best for you.
Once you’ve got a home insurance policy, you’ll pay the annual fee each year (which is around $1500 per year for the average Aussie home), and if something goes wrong you can make a claim with your insurer and they’ll take care of the repairs.
It’s not all as simple as that though, which is why it’s important to double check a few things before you apply for home insurance.
The two types of home insurance
To cover your home, you can take out two different home insurances:
- Home insurance: sometimes called building insurance, this covers the house itself and all fixtures, like kitchen cabinets, walls, ceilings, and plumbing
- Contents insurance: covers all your personal belongings such as couches, jewellery, and televisions
You can take out separate policies, or opt for a home and contents bundle, which is more common. Investors will probably only need to take out home insurance, and leave the contents insurance to their tenants.
Knowing the home insurance lingo
When you start searching for home insurance, you’ll come up against some industry terms:
Premium: the premium is the price of your cover, which you’ll pay each year as a lump sum, or you may opt to pay it weekly, fortnightly or monthly.
Excess: if you have to make a claim, you’ll need to pay excess before the insurance company will dish out any repairs or cover costs. You can choose the amount of excess you’ll pay (the higher the excess, the lower the premium). Most excess is in the range of $500 – $1000.
Insured events: you’ll probably find a list of the most common events that your insurance covers, such as fire, water damage (although that often doesn’t include flooding), and malicious damage.
Product disclosure statement (PDS): this is the fine print, and it’s the most important document because it details every element of your coverage and what circumstances aren’t covered. No skimping on the PDS!
Nominated sum insured: when you apply for a policy, you’ll have to state the value of your home (and contents, if you’re taking out a joint policy to cover your possessions too), so you’re covered for the full amount if your house needs to be rebuilt. If you’re building a brand new home, it’s easy to use your purchase price as the nominated sum insured.
What should you look for in a policy?
This is one of those times when reading the fine print is critical. Yes, you’ll have to read that thick booklet from start to finish! It’ll outline every instance you’re covered for, and what falls under the uninsured category.
For example, you might think water damage would cover flood from rainwater, but it usually only covers an ‘escape of liquid’, such as a burst pipe or overflowing dishwasher – and even then, it has to be an unexpected event, not the result of wear and tear.
Depending on the value of your home, you’ll want to find a policy that covers all the basics plus any extras you might want to add in. After you’ve compared a few product disclosure statements, you’ll have a better idea of what’s included as standard in a policy.
How to find the right policy for you
You can go online and get quotes from insurance providers. You’ll need to have some information ready, like the value of your home, the address, who’ll be living at your home and the start date of your policy.
Once you’ve narrowed down a few different policies, look through each PDS carefully and make comparisons, to be sure you’re choosing a policy that covers everything you need.
For instance, some policies will cover outdoor structures like patios and sheds, while others won’t. If you have ‘extras’ at your home, like a pool or tennis court, you’ll need to make sure they’re covered as well.
You might be surprised by some of the inclusions, too; who would have thought you could claim for food spoilage during a power outage?
Choosing optional extras
Providers will usually offer optional extras, but they will add dollars to your premium. Optional extras include:
- Pets: if your pet is injured in an accident, you could claim assistance for veterinary bills (usually around $2000).
- Flood: you’ll probably have to dig around for a provider who’ll cover flood from natural disaster, and they may only offer it as an added extra.
- Portable values cover: some policies will include this as standard, and some will offer it as an extra. It covers items you would regularly remove from your home, like instruments, jewellery and mobile phones.
- Motor burnout: this covers burnout of appliances less than 10 years old, such as ducted air conditioning or garage door motors.
- Commercial storage: for any belongings stored off-site in a storage facility.
How to save money on your policy
- Opt for a higher excess
The higher your excess, the lower your premium, so if you know you can afford a $1000+ excess if you ever have to make a claim, you can save a lot on your premium each year
- Have good security measures in place
Windows with locks, security screens and alarms help bring the premium down
- Make sure you’re comparing apples to apples
Not all home insurances will cover everything, so check that the policy is giving you what you need for a good price
- Choose a neighbourhood with a low crime rate
Yep, your home insurer will check the crime statistics for your suburb which will directly impact your premium
- Choose a suburb that isn’t prone to natural disasters or flooding
If you buy in a known disaster area, you’ll be penalised in your insurance premium. Insurers have paid out billions of dollars in flood insurance claims in the last several years, which has bumped flood-prone suburbs into thousands of dollars extra in home insurance each year.
- Check for offers with insurance providers: some providers will offer new-applicant bonuses like discounts, cash back or other multi-policy discounts, if you switch your car insurance over.
Once you have a policy in place, make sure to check and compare each year. You might find there’s other providers now offering extras or coverage that yours doesn’t.
This guide is for information purposes only. Please make sure you read the PDS carefully before signing up for home insurance.
Buying a new home?
We know you have questions, and we know we can help answer them. Our team at Insignia Homes are happy to chat with you anytime, and clear up anything you’re not sure about.
We can show you available blocks, home designs, and house and land packages. We can even help you see what you can borrow! Feel free to contact us for a friendly chat, so we can give you some of the answers you’re looking for.