First-time home insurance
A beginner's guide to getting the right home insurance for your new and most important investment
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Buying your first home is always super exciting and a little bit confusing. There are so many things to wrap your head around before you even move in. Home insurance is just one of them. We're here to make that part a little easier. This guide will skip all the insurance jargon and give a straight-to-the-point, human explanation of how home insurance really works.
We'll run through the different types of home insurance, what's usually covered and when you should get a policy. We'll even share a few little-known facts to keep things interesting.
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What's in this guide?
- Start comparing your new home insurance policy here
- What do I need to know before I get started?
- How does home insurance work?
- Do I really need home insurance?
- When should I get home insurance?
- What types of home insurance are there?
- What's usually covered by home insurance?
- How to customise your home insurance
- What isn't covered by home insurance
- 5 tips for first home buyers
What do I need to know before I get started?
We always do our best to avoid any unnecessary jargon but there are a few terms and phrases that regularly pop up when looking for home insurance, so they're worth understanding.
|Term||What it really means|
|Buildings insurance||Cover for the structure of your home but not what's inside it. Insurers will sometimes refer to this as just home insurance|
|Contents insurance||Cover for the things inside your home, but not the actual building. Best for renters or people who have strata insurance|
|Home and contents insurance||The combo. Cover for the actual structure of your home, as well as the stuff you keep inside it|
|Premium||The price you'll pay for your policy. Usually a monthly or annual fee|
|Excess||Your out-of-pocket expense if you have to make a claim|
|PDS||The product disclosure statement: a document with all the info about your policy|
|Sum insured amount||The maximum payout by your insurer|
|Total replacement||A benefit that means your insurer will cover the total cost of replacing your home, even if it's higher than your sum insured amount|
|Underinsurance||A common problem in Australia where people don't take out enough insurance|
|Insured events||Specific events that your home insurance will cover, such as break-ins, falling trees and natural disasters|
|Sum insured safeguard||If your sum insured ends up being less than the cost to repair, the insurer will increase your sum insured by a certain percentage|
How does home insurance work?
Home insurance is designed to cover the cost of repairs if your house is ever damaged or destroyed in an unexpected event. That could be a fallen tree, a heavy storm or even if someone breaks in and steals all your stuff.
You pay a monthly or annual fee – known as a premium – and in exchange your insurance company promises to pick up the bill when something goes wrong.
Be aware though, home insurance won't cover everything. For example, don't expect a payout if you deliberately set your house on fire or if the damage is due to general wear and tear.
If you do ever have to make a claim, you'll have to pay an excess first. This is the amount of money you have to contribute before the insurance company starts helping out. It's usually somewhere between a few hundred and a few thousand dollars but most insurance brands let you set the excess yourself.
Do I really need home insurance?
Probably, yes. Lots of lenders will only issue a fully unconditional mortgage once you have an adequate level of home insurance. Some will ask you to set up home insurance for when you settle, or even before. This means if you're looking for your first house, you should get ready to find home insurance too.
If you buy your home outright, you're not legally required to get home insurance – but you're putting yourself at a massive risk if you don't. You could find yourself footing a bill worth hundreds of thousands of dollars, or suddenly being without anywhere to live.
When should I get home insurance?
You should set up home insurance so you're covered from the moment you become responsible for any damage. This varies between different states so check the list below:
|State||When will I become responsible for damage?|
|NT||When the purchase price is paid or when you're given possession of the property – whichever comes first|
|QLD||At 5pm on the first business day after the exchange of contracts|
|ACT||On exchange of contracts|
|TAS||On exchange of contracts|
|SA||On exchange of contracts|
|WA||When the purchase price is paid or when you're given possession of the property – whichever comes first|
What types of home insurance are there?
There are three main types of home insurance: home, contents and the combination of both.
Insurance for the structure of your home, such as the roof and walls. Sometimes called home insurance.
Home and contents insurance
The combo – cover for your home and everything you keep in it.
What's usually covered by home insurance?
Most insurers will give you a list of specific events which are covered by your insurance. These are called insured events. You should expect the following events to be covered:
|Storms and rainwater||Hailstones damage your roof, letting rainwater inside|
|Fire||An electrical fault sparks a fire which seriously damages your home|
|Theft||Burglars break into your home and steal your belongings|
|Malicious damage||A vandal graffitis your home and puts dents in your garage door|
|Escape of liquid||A pipe bursts and causes water damage throughout your home|
|Lightning||A lightning strike punches a hole through your roof|
|Explosion||A gas leak causes an explosion and destroys your home|
|Impact||A tree falls onto your house, damaging the roof and walls|
|Breakage of glass, ceramic and sanitary features||A stray cricket ball breaks your window or solar panel|
|Flood||This one is usually optional, but will cover you if a nearby river or lake bursts its banks and ends up seeping into your home|
How to customise your home insurance
Most insurance brands will let you customise your home insurance to create a policy that perfectly suits you. You can add extra features, insure specific items, and even change your excess to reduce the price of your policy. Here's a quick rundown:
- Accidental damage – Usually an optional extra but sometimes included as standard. It covers mishaps such as a red wine spill or cracked TV screen.
- Motor burnout – Also known as fusion damage insurance, it covers the repair or replacement of household appliances if the electric motor dies.
- Flood cover – Sometimes included as standard but usually an optional extra. Particularly important for people living in flood-prone areas.
- Specified items – If you have any high-value items, they might not be fully covered by a standard policy. However, most insurers will let you include them if you specify what they are.
- Personal effects – Sometimes called mobile contents insurance, this covers your stuff while you're on the move. So things like your handbag, backpack or phone.
- Sum insured safeguard – If your sum insured ends up being less than the cost to repair, the insurer will increase your sum insured by a certain percentage
- Excess – Most insurers let you choose your own excess. Take a higher excess and you'll enjoy cheaper premiums. Just be wary you'll have to pay that if you ever have to make a claim.
What isn't covered by home insurance
Home insurance might be one of the most important safety nets you can ever have, but even safety nets have holes in them. Here are some things to watch out for that probably won't be covered by your home insurance:
|❌ Wear and tear||Plaster cracks due to the building settling over time|
|❌ Damage due to neglect||Your home floods because you didn't keep your gutters clear|
|❌ Termites, rodents and vermin||A termite infestation has compromised the timber joists|
|❌ Asbestos||Asbestos is discovered in your home and extensive work is needed to safely remove it|
|❌ Mould||Mould damages your walls and furnishings|
|❌ Hydrostatic pressure||Water leaks into your home due to pressure on your pool walls|
|❌ Defects||There is a fault in the design of your home which means it is not safe or habitable|
5 tips for first home buyers
No home insurance policy is perfect for everyone so it can be a frustrating task finding the one that's best for you. Thankfully, our handy tips can help:
Compare your options online. Don't go with a brand just because your mum recommended it. Do the leg work, request a few quotes and compare. It could save you hundreds or even thousands of dollars.
Ask questions until you understand. If you're not sure about something, get in touch with the insurer and ask. It's the best way to figure out exactly what you're covered for and avoid any nasty surprises down the line.
Customise your policy. Look at the optional extras that are offered by an insurer and weigh up whether they're right for you. If you have high-value items, specify them on your policy. Adjust the excess so the regular premium suits your budget.
Look for online deals. Heaps of home insurers offer sign-up deals to new customers which can reduce your premium by as much as 30%. Price isn't everything, but it's certainly a deciding factor so keep your eyes peeled for offers and promotions.
Do it every year. You should compare home insurance brands every year to see if you can get a better deal than you're currently on. Remember, insurers will often hike prices after your first year, so switching could save you serious cash.
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