How to Protect Your Home

home-insurance

How to protect your home for the future

It's likely that your home is the most expensive asset that you'll purchase in your lifetime. Protect the asset that you've worked so hard for by taking the right steps to protect it for you and your family. As part of their lending criteria, most Australian lenders require that security properties are insured against loss or damage, and that you also take out building insurance.

Insurance is also crucial if you plan on accessing your equity in the future, as you are borrowing against your home. You will need to maintain adequate insurance on the property and keep it in a good condition. You may also need to obtain your lender's approval for other people to reside in your property if need be.

It's important to note that when choosing an insurance policy, the circumstances of every person and situation is different. Speak to an insurance broker to discuss your specific needs.

Home and contents insurance

Insuring is the most common method of managing the potential risk of loss or damage. It can apply to an individual or property and it works by transferring the risk to an insurance company, in return for a payment which is known as a premium. Your household will typically pay lump sums on a regular basis to protect against an event if it results into some element of financial hardship. The most common type of insurance used to protect properties is home and contents insurance.

The cost of insurance is considered as an expense when a lender is assessing your financial position and is also considered as a 'financial need' within the household. If you already own a property and you're using it as a security property, you'll be asked to provide your insurance details.

Home and contents insurance is considered a medium-term insurance need and generally comes under 'general insurance'. This type of insurance tends to cover the concerns of individuals and household, as well as renewed on a yearly basis depending on whether or not the risk continues. Premiums increase and decrease each year, depending on your circumstances. Home and contents insurance allows you to operate with the peace of mind in knowing that your asset is protected in the event of financial hardship or an unexpected event.

A general insurance contract is usually called a policy and this contains the terms of the agreement or the product disclosure statement.

  • Where can I get home and contents insurance? Your lender should be able to recommend general insurance to you, but be mindful that in some cases they may get a commission for this so you might also want to compare a range of insurance providers yourself.
Building (home) insurance

This cover provides protection against damage or destruction to residential buildings such as flats, units, townhouses and houses. Generally, building (home) insurance also includes other structures such as garages, sheds, fences and decks. Lenders require this as the minimum insurance when using a property as security.

Contents insurance

Often combined with home insurance, contents insurance covers loss or damage to domestic goods or property that you own. It may cover goods that an insured person buys as well.

Owner-builder insurance

This type of insurance protects owner-builders from losses during the process of building or construction. This cover is usually optional under a standard building policy or could be required to be taken out as a separate policy.

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Lender's Mortgage Insurance (LMI)

Loans that are attached with a security, such as a home loan, are generally insured regardless of the loan to value ratio (LVR) or the loan amount. The borrower generally pays LMI on full documentation loans when the LVR is above 80% and the lender pays LMI when the LVR is less than 80%. For low documentation loans, the LVR is around 60%.

LMI protects the lender in the event that you default on your loan, or you're unable to meet your repayments. If the borrower decides to sell the home and there is a shortfall in the funds, the insurer pays out the outstanding balance. Some major Australian LMI providers are QBE and Genworth Financial.

The type of loan and its conditions offered to you are often influenced by the LMI provider and their individual criteria. If LMI is required, the decision of the insurer is pivotal to your loan approval. In some cases, a loan might be provided but with additional assets used as security. This may include additional real estate or establishing another guarantee.

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Protecting your investment property

As many investment property loans exceed 80% LVR, additional security or LMI is often required. Lenders will generally allow up to 95% LVR for loans with LMI. Some lenders will let you use your current home as security and depending on its value, and the amount of equity you have, this could mean that you avoid paying LMI.

Landlord insurance

This may be available as an option under building insurance or taken out as a separate policy. It protects landlords even further against events such as malicious acts and theft by the tenants or financial losses should the tenant fail to pay their rent.

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Tips for protecting your home

  • Consider income protection. Maintain the stability of your income by taking out income insurance. This ensures that you continually receive an income should anything happen to your ability to work.
  • Maintain a cash buffer. It's best to keep some equity or liquid assets handy as one of your risk management measures so that you can prepare for unexpected emergencies.
  • Lock in your interest rate. While there is the risk that you won't benefit if interest rates fall, a fixed interest rate eliminates any future guesswork as to what your repayments will be in the future. This can help with future budgeting and financial planning.
  • Beware of cross-collateralisation. This is when the liabilities from one asset are woven into the liabilities of another. One example is when you use the capital appreciation from one property to finance another property. If you can't meet your repayments with one asset, this could ripple through your debt structure which could harm your entire portfolio.
  • Use a trust. This is a legal entity that can own a property and has beneficiaries that identifies where the returns of the investment go. A benefit of a trust is that if a debtor takes action against you, the trust is protected. If your property assets are owned by a trust only the creditors of the trust can take legal action.
  • Consider a pre-nup. While it's a topic that makes us uncomfortable, if you're getting married or you're in a long-term relationship and you want to ensure that your assets stay protected, then this can provide you with added security. A pre-nup states how the assets will distributed should a marriage breakdown occur.
  • Make sure your will is up to date. If you ensure that your will is up to date, it can protect your assets and ensure that they are distributed how you would like them in the event that you pass away.
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Compare home loans

Rates last updated August 21st, 2017
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.49% 4.47% $0 $375 p.a. 85% Go to site More info
UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
Reduce Home Loans Rate Buster 100% Offset Variable Home Loan - Up to $750k (LVR <=80%)
Borrow up to 80% LVR with no ongoing fees and a 100% offset account.
3.54% 3.54% $440 $0 p.a. 80% Enquire now More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage of a 100% offset account along with no annual or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - Special LVR <=80% (Owner Occupier and Principal & Interest only)
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.79% 3.84% $445 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
Pay no ongoing fees on a competitive variable rate home loan.
3.86% 3.87% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.85% 3.86% $0 $0 p.a. 90% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% Go to site More info
Tic:Toc Live in Loan Variable Rate
A competitive variable rate product with low fees offered by a 100% online lender.
3.68% 3.69% $0 $0 p.a. 80% Go to site More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.80% 3.81% $0 $0 p.a. 95% Enquire now More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
ING Orange Advantage Loan - $500,000+ (LVR <=80% Owner Occupier, P&I)
A loan with no application fee and borrow up to 95% LVR.
3.74% 4.06% $0 $299 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.74% 4.85% $0 $0 p.a. 95% Go to site More info
ING Orange Advantage Loan - $150,000 to $500,000 (LVR <=80% Owner Occupier, P&I)
A fully featured home loan with an offset account and discounts available. $1000 cashback offer available for loans over $300k. Terms and conditions apply.
3.79% 4.11% $0 $299 p.a. 80% Go to site More info
Mortgage House Advantage Variable Home Loan - 80 (PAYG Special No Offset)
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.99% 3.99% $0 $0 p.a. 110% Go to site More info
Bank Australia Basic Home Loan - Special LVR <70% (Owner Occupier)
A special variable rate home loan with no application or ongoing fees.
3.74% 3.75% $0 $0 p.a. 70% Go to site More info
3.79% 4.07% $500 $0 p.a. 95% Go to site More info
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
3.78% 3.79% $600 $0 p.a. 90% Enquire now More info
Westpac Flexi First Option Home Loan - 2 Years Introductory Special Offer (New Owner Occupier, P&I)
This competitive introductory rate is a limited time offer for new owner-occupiers
3.91% 4.42% $0 $0 p.a. 95% Enquire now More info
Community First Fixed Home Loan - 3 Years Fixed Owner Occupier special offer (New Loans only)
A limited time fixed rate special with no monthly or annual fees plus a 100% offset account.
3.89% 4.97% $600 $0 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.74% 4.81% $0 $0 p.a. 95% Go to site More info
Bankwest Equaliser Home Loan - LVR ≤80% (Owner Occupier, P&I & $200k+) new customers only
Enjoy a variable 3 year introductory rate with the Bankwest Equaliser Home Loan.
3.72% 4.19% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.88% 4.89% $0 $395 p.a. 95% Go to site More info
Finsure Home Loan Deal
Enjoy a low variable rate with no application fee.
3.69% 4.03% $0 $299 p.a. 80% Enquire now More info
P&N Bank & Home Loan & Bag
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.99% 4.02% $395 $0 p.a. 80% Go to site More info
Select Encompass Credit Union Special Offer 2 Year Fixed Rate Home Loan
A fixed rate loan with limited fees and a competitive interest rate.
3.74% 4.15% $0 $0 p.a. 95% Go to site More info
Beyond Bank Low Rate Special Home Loan - LVR <70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.83% 3.83% $0 $0 p.a. 70% Go to site More info
Auswide Bank Variable Home Loan Plus with Freedom Package - $150K+ LVR <= 90% (Special Offer, Owner Occupier)
A high maximum LVR home loan with redraw facility and additional payments.
3.69% 4.08% $0 $395 p.a. 90% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 80% Go to site More info
Mortgage House Advantage Variable Home Loan - 70 (PAYG Special No Offset)
A home loan with a competitive interest rate and flexible repayment that has a maximum LVR of 70%.
3.64% 3.66% $0 $0 p.a. 70% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.69% 4.45% $0 $375 p.a. 85% Go to site More info
QT Mutual Bank Mortgage Saver Home Loan
A low rate home loan with no application or ongoing fees. Note that to be eligible for this loan you must be QLD resident.
3.95% 3.95% $0 $0 p.a. 95% Go to site More info
4.44% 4.83% $0 $0 p.a. 95% Enquire now More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.99% 3.99% $0 $0 p.a. 85% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
A low variable rate loan with no application or ongoing fees.
4.09% 4.11% $0 $0 p.a. 80% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
Get access to a redraw facility and offset account without the annual fee.
4.19% 4.19% $0 $0 p.a. 90% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
Package your home loan to get discounts on your interest rate and other financial products.
4.39% 4.78% $0 $395 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier, P&I)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.99% 4.77% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
3.94% 4.88% $0 $0 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier P&I)
A competitive loan with flexible features. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.59% 5.01% $0 $395 p.a. 95% Go to site More info
4.44% 4.88% $0 $0 p.a. 95% Enquire now More info
Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate (Owner Occupier, P&I)
Borrow up to and fix in a 3 year home loan rate. Access your account via internet and phone banking.
4.39% 5.42% $300 $10 monthly ($120 p.a.) 95% Enquire now More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Standard Rate, P&I)
A low 3-year fixed rate with the option to split your loan for free.
3.99% 4.80% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.79% 4.75% $0 $0 p.a. 95% Go to site More info
ANZ Simplicity PLUS Home Loan - Special Offer (Owner Occupier, P&I)
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
4.03% 4.07% $0 $0 p.a. 95% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 4.99% $0 $395 p.a. 95% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.99% 4.98% $0 $395 p.a. 95% Enquire now More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years, P&I
Lock in a discounted fixed rate with a low service fee.
3.99% 4.90% $0 $395 p.a. 95% Enquire now More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
Earn Velocity points on a competitive variable rate home loan with flexible features.
3.79% 3.92% $0 $10 monthly ($120 p.a.) 80% Enquire now More info
Connective Smart Options Basic Home Loan - LVR ≤ 70% (Owner Occupier, P&I)
A variable home loan with $0 annual or monthly fees.
3.74% 3.74% $363 $0 p.a. 70% Enquire now More info

Frequently asked questions

There is the option of putting your home into a trust but there are a number of tax implications you'll need to consider. Speak to your accountant about what structure best suits your needs.

As a licensed or owner-builder within Australia, you may need insurance to meet certain regulations. This includes cover triggered by the death of a builder, disappearance of the builder and insolvency of the builder.

Shirley Liu

Shirley is finder.com.au's publisher for banking and investments. She has completed a Masters in Commerce (Finance) and is the author of hundreds of articles. She is passionate about helping Aussies make an informed decision, save money and find the best deal for their needs.

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