Okay, so we already know that buying a house is a huge decision – but what about home insurance?.
Not only does it involve a heavy investment, but also comes with the stress in finding the right property, attending the building and pest inspection, and more. However, sometimes lenders want their borrowers to get home insurance before proceeding with the settlement. In fact, they want it to be included in the policy.
Why Do You Need Home Insurance?
When you plan to buy a house, it is important to protect your property against any possible risks. Home insurance usually gives you coverage against any damage that may occur due to rainwater, fire, and most natural disasters. It covers the items, such as air conditioners, switches, cables, pipes, light fittings, hot water system, and more. In many cases, gates and fences are also covered in the insurance contract. It also provides coverage of valuable items like washing machines, furniture, and computers.
Many insurance companies design discounted bundles that allow you to get coverage for the home and your belongings too.
How Much Should You Insure for?
This is a critical answer that has to be decided when it comes to organising home insurance. Home insurance will cover the labour and raw material cost that is required to rebuild the house if it gets destroyed by any natural disaster or other reasons.
Normally, an insurance company estimates the insurance amount in two ways:
- It evaluates the condition of different building elements to compute the rebuilding cost. This gives the insurer an idea about how much the cost (labour and raw material) of what they need to reconstruct the building will be.
- The company uses a cost per square meter method, which gives a rough estimate of the material used and the size of a building.
Underinsuring is a very common problem in Australia. If you are buying a house in a high-risk area where floods (check for flood using these steps) or forest fires are common, it is better to get a correct estimate of how much you should get to receive complete coverage in case of a disaster.
Type of Property You Need Insurance for
There are different types of properties you need insurance for. For example, if you are planning to purchase a house, you need to have a building insurance and also provide its evidence. As for townhouses and units, there is no need to provide insurance, because the strata corporations already insure the building. For vacant land, no insurance is required.
If a lender asks for the insurance evidence, you can ask the insurer to fax the certificate of currency. However, make sure that the lender information is included in the certificate of currency and you have chosen the property insurance for the minimum amount. You will need to provide your lender with the certificate along with the loan offer as it will not delay your settlement.
Before going into detail, however, the first thing you should do is figure out is when you need to organise building insurance?
When to Get Home Insurance?
You should get home insurance at the time of exchanging a contract as this is when you become an official buyer of the property and you are legally bound to purchase it. However, the requirement varies from one state to another. Home insurance is mainly done to get coverage for the period between exchange and settlement. Once the period lapses, the actual policy becomes active.
If you are bound to get an insurance under the mortgage contract, send a copy of the cover note to the bank in order for them to release the settlement funds.
How to Choose Insurance Provider?
There are a number of insurance providers in the market who offer home insurance. It is very important to compare the rates and features offered by them before making a decision.
Make sure that you ask about the hidden charges. Many insurance providers do not reveal certain charges that are included in the package, and you only get to know about them after you’ve chosen their insurance. You might end up buying the package, thinking it will not cost you much only to find out later that the cost is higher than what you initially thought. Therefore, seek the advice of a financial expert if needed.
Not sure what to do from here?
There are lots of home insurance providers in Australia. We can help refer you to a few insurance providers we work with regularly if you want more information get in touch with our team.