Need home insurance for your apartment? Here’s how to find the right cover.
If you’re one of the nearly 10% of Australians who live in an apartment, your home insurance needs will be slightly different to those of someone who owns a house. After all, you don’t actually own the building you live in, only a small part of it, so how does this impact upon the home insurance policy you choose?
Let’s take a closer look at how apartment home insurance works, and how you can find the right type of cover.
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Do apartments need home insurance?
If you live in a strata-titled property, such as an apartment, unit or flat, loss or damage to the building should be covered by strata insurance, the cost of which is covered by your strata fees. As such, you don’t need the building cover provided by a traditional home insurance policy, so it’s not possible to buy home insurance for an apartment.
However, you will need to take out a policy that provides contents-only cover. Contents insurance covers your belongings against loss or damage due to a wide range of events, including fire, storm, theft, vandalism and more. It also includes cover for those interior fixtures and fittings you own that help make your apartment a home, such as blinds, curtains and carpets.
What about apartment buildings with body corporate?
The body corporate, which is sometimes referred to as the owners’ corporation, is responsible for managing and maintaining the common areas of an apartment block. As the owner of an apartment or unit in the property, you become a member of the body corporate and can have a say in the decision-making process to do with all matters concerning common areas.
The body corporate is made up of all lot owners in the strata scheme and performs the following important roles:
- Ensuring that adequate insurance cover is in place for all the buildings, including cover against physical loss or damage to the building as well as public liability cover for common areas
- Organising the repair and maintenance of common property, for example car parks, security gates and public lighting
- Establishing and enforcing by-laws that set out what lot owners can and can’t do, for example own a pet
- Deciding how much each lot owner must pay so that the body corporate can perform all necessary tasks
- Preparing financial statements and maintaining financial records
The body corporate may vote to get a professional strata management team to manage the building on its behalf, or it may decide to take care of all management tasks itself.
What does strata insurance cover?
If you own your apartment, you usually don't need to worry too much about strata insurance.
This is the responsibility of the body corporate. They need to purchase and maintain the necessary insurance cover for the property – in other words, to make sure the building and any common areas are properly insured. All you have to do is pay the fees.
This is where strata insurance comes in. This type of cover, which sometimes goes by the name of strata title insurance, is a mandatory form of insurance for strata-titled properties. It covers the cost of repairing or replacing the building when loss or damage is caused by fire, storm, hail, vandalism, theft and a number of other risks.
It also includes cover for loss or damage to any common property or contents, such as the following:
- Common areas
- Common entries and exits
- Gutters and roofs
- Exterior walls
- Ceilings and floors
- Swimming pools
- Tennis courts
- Garden equipment
Finally, if someone is injured on common property, strata insurance also includes public liability cover to protect against any compensation claims that may arise.
What can I do to protect my apartment?
So your body corporate has handled protecting the building itself. But how do you ensure that everything behind that front door is protected from the worst?
After all, it's not your fault if your upstairs neighbour accidentally leaves their bath running and the water drips down onto your new tv.
This is why it's a good idea to consider contents insurance for your apartment.
Here are some things that can be covered if you've got contents insurance:
- Furniture and furnishings
- Unfixed electrical goods and appliances
- Computers and computer equipment
- Curtains and blinds
- Carpets and rugs
- Floating wooden floors
- Air conditioners (that are solely for the use of your apartment)
- Pot plants
Whilst each insurer is different, you'll generally be covered against loss or damage due to the following insured events:
- Theft or burglary
- Accidental glass breakage
- Escape of liquid
- Malicious acts and vandalism
- Riot and civil commotion
Need to protect things like your kitchen and bathroom?
So if strata insurance covers common areas, ceilings, and floors, and contents insurance covers your possessions, how do you make sure that things like your kitchen and bathroom are protected?
It's actually pretty simple.
These are commonly referred to as 'fixtures and fittings' in insurance, and in order to protect them all you have to do is take out additional fixtures and fittings cover on top of your contents insurance policy. This will cover things like bathroom and kitchen cabinets, air-conditioners, and anything fitted to your apartment. This type of cover is usually only available when there is a body corp or strata insurance.
Why is contents insurance important for apartment owners?
There are several reasons why apartment contents insurance is a wise investment:
- Stuff happens. Regardless of how secure or state-of-the-art your apartment building may be, things can still go wrong and cause costly damage to your stuff. From severe storms and fires to something as simple as a burst pipe, accidents and mishaps can happen at any time.
- Your possessions are important. Your contents are the things that turn your apartment into a home, and you might be surprised just how much they’re worth in total. Taking out contents insurance is a simple way to guarantee that you won’t be caught short if disaster strikes.
- Without it, you could lose everything. If your apartment was destroyed by fire and you lost everything you own – your couch, bed, TV, laptop, clothes, washing machine, everything – would you have enough money to replace it all. Most people wouldn’t, which is why contents insurance is such a worthwhile expense.
- There are extra benefits. Most of us only think of home and contents insurance as providing protection for those worst-case scenarios when we lose everything. But contents insurance can offer a range of other important financial benefits, such as legal liability cover, cover for contents while in storage, replacement of locks if your keys are stolen, and even optional cover for portable valuables (such as jewellery and smartphones) when you take them with you away from home.
How to reduce the cost of contents insurance
The following factors can help lower your apartment contents insurance premiums:
- If your building has security. How secure is your apartment building? Are there gated stairwells? Can guests only gain access to the complex or to the lifts with a key or a card, or can anyone just wander in off the street at any time? The more secure your apartment is, the smaller the risk of theft or burglary and the more affordable your premiums will be.
- If doors lock automatically. Doors that lock automatically when shut are another simple measure that can greatly increase the security of a building and make it harder for uninvited strangers to get in.
- If you’re on a higher floor. As a general rule, the higher up your apartment is, the less likely you are to be broken into. This can help lower your apartment contents insurance premium.
- If you don’t have a balcony. Burglars gaining access to apartments through unlocked balcony doors is a lot more common than you might think, so apartments without balconies generally tend to be cheaper to insure.
- If you choose a lower sum insured. Choosing a lower level of cover will reduce your premium. However, you should be very wary of skimping on cover just to save a quick buck as the financial consequences of underinsurance can be severe.
- If you choose a higher excess. Most insurers give you the freedom to choose the amount of excess you would like to pay in the event of a claim. By choosing a higher excess, you can lower your premium.
- If you take advantage of discounts. From multi-policy and seniors discounts to online coupon codes, there are several simple ways you can lower the cost of cover. Buying online instead of over the phone is another easy way to save money.
There are several other factors that can impact on the cost of cover. For example, if your building is located in a suburb with a higher than average rate of burglaries and break-ins, expect higher premiums. Similarly, the age of your building and the materials used in its construction can also have an effect. For example, the better equipped your building is to withstand storm damage, the lower the likelihood of your contents suffering storm damage and the cheaper your premiums will be.
What if I want to rent my apartment?
Own an apartment that you plan on renting out to tenants? If so, you’ll need to consider buying landlord insurance. Landlord insurance covers all your fixtures and fittings in the apartment, which includes things like window blinds, carpets and light fittings.
These policies also include financial protection against a number of other risks, such as if a tenant defaults on their rental payments or if a public liability claim is made against you. Some landlord insurance policies will even cover your loss of rent if the apartment suffers contents damage and becomes uninhabitable for a period of time.
If you need cover for an apartment you want to rent out as an investment property, check out our guide to landlord insurance for more details on how this type of insurance works.