Buying a property is exciting, especially when it’s your first home.
But after the novelty wears off, there are a few logistical aspects you probably haven’t thought about yet.
Something that may not have crossed your mind yet is the importance of home and contents insurance – especially if you’ve bought a house.
So here’s what first home buyers need to know about home and contents insurance.
What is it?
There are a few different options within home and contents insurance.
The main three are:
- Home insurance: This typically provides a certain amount of cover for the physical structure of your building or property, but not for the valuables within it.
- Contents insurance: This will provide cover for your possessions and treasured belongings within your house, but not the actual building.
- Home and contents insurance: Gives you the option to cover both!
When do you need it?
There are many circumstances in which it’s likely you’ll want home or contents insurance (or both).
For example, if you live in an area that’s highly flood- or bushfire-prone, you may want the confidence of knowing that if something does happen to your house, you’ll be covered.
If you’re near a major shopping centre or train station, theft rates may be higher.
Because of this, you should consider taking out a comprehensive contents insurance policy so that if a break-in does occur, you’ll be eligible for reimbursement.
You might also just want peace of mind.
If you have valuables or anything sentimental at home that you’d like to be protected, it’s a good idea to get contents insurance just so that you have that security.
How does pricing work?
Home and contents insurance is calculated based on a large number of variables.
External factors such as the material your house is built with, what your roof is made out of, how secure your property is, and various other location-related aspects (like the crime rate in your area) can all influence how much you pay.
For instance, if you live in a bushfire zone or are near bushland of any kind, it’s likely you’ll pay a higher premium for home insurance.
Similarly, those living on the water may be subjected to higher fees due to storm surge.
Figure out which cover for natural disasters you would like to pay for – policies generally won’t cover you for everything.
It’s important to look into details carefully to make sure that cover is suitable.
For instance, if you go on holidays and your house is broken into, you may not receive contents cover if your home was unoccupied for more than 60 days.
How can you save money on your premiums?
Shopping around is a sensible strategy, but there are other steps you can take.
For instance, household alterations can mean you pay less for your premiums.
For example, if you don’t have any strong locks on your house, installing deadlocks and an alarm system will improve your security and could lower your premiums.
If you want to take things one step further, you could also install cameras to your main entrances.
What are the biggest ‘musts’?
Firstly, it’s really important to read the fine print.
If you’re trying to take out insurance in a hurry, it’s easy to miss things.
Take the time to make sure that you’re taking out cover that matches your needs.
In home and contents insurance, some events may not be covered in the way you think; for example, a fire as the result of a lightning strike may only be reimbursed under fire cover, not under storm cover.
If you live in an area near the ocean or any waterways, it could be important for you to have cover for storm surges and tsunamis.
When you take out contents cover it’s important to provide key documentation.
Firstly, you should give your insurer proof of the value of the item, whether that’s a receipt or a valuation.
Also, you should take photos of the item to show its current condition, and also its current location in your home.
This way, if the item is stolen and you need to make a claim, you will have photos on-hand of exactly what the item looked like so that it will be easier to replace.
Home and contents insurance isn’t necessarily the hassle that many people might think it is.
As long as you read the fine print and are clear with your insurer about what you are covering, it should be an easy process.
Let’s just hope nothing ever happens to make you take out a claim!
About the author: Richard Laycock is an Insurance Expert at finder.com.au, Australia’s most visited comparison website.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.