Amid the excitement of buying a new property, it’s easy to let down your guard when it comes to insurance.
But there are a number of options you should consider to get peace of mind against the unexpected.
Whether you’ve found your forever home or you’re buying an investment property, these are the 3 key insurances you’ll want to be aware of.
1. Home insurance
It’s been on a lot of people’s minds recently due to the devastating floods – and home insurance isn’t something you want to go without.
Home and contents insurance offers cover for both the structure of your home and your valued possessions kept inside it, such as jewellery, furniture, and laptops.
When you apply for a home loan, many lenders only issue a fully unconditional mortgage if you have an adequate level of home insurance, even if, strictly speaking, it isn’t a legal requirement at this stage of the process.
Your new property falls under the responsibility of the seller until settlement.
But, to be on the safe side, many sensible buyers choose to get home insurance from the time the seller signs the contract.
And, in fact, the time you become responsible for any damage at your new home can vary from state to state, as Finder’s guide to first-time home insurance outlines.
If you’ve bought an investment property that you’re immediately renting out, then landlord insurance can protect you for your home and contents – plus, it’ll also cover you for loss of rent and malicious damage by your tenants (including replacement locks if you have to evict someone).
In other words, it’s a no-brainer for prospective landlords.
Interestingly, if you buy your home outright, you're not legally required to get home insurance.
However, you're putting yourself at a big risk if you go without coverage.
You could find yourself footing a bill worth hundreds of thousands of dollars or being without anywhere to live if disaster strikes.
Tips: Look at multiple home insurance deals: A range of brands offer sign-up deals to woo new customers.
These can reduce the cost of your premium by up to 30%.
After you’ve found a policy, be sure to make a note in your calendar 11 months later to compare brands and see if you can get a better deal than you're currently on.
2. Title insurance
Title insurance is a specialist type of insurance that can cover a range of risks that could impact the ownership of your home – and your legal rights to it – following your settlement.
Your lender will already have a title insurance policy over your property.
But its policy doesn't cover you.
A title insurance policy differs from home and contents cover in that it’s a one-off payment. You won't pay ongoing premiums.
There’s also no excess to pay if you need to make a claim at some stage in the future.
What’s more, title insurance provides protection to home buyers in a number of situations outside of what’s included by home insurance policies.
For a residential home buyer, the title insurance covers risks like:
- Title defects and planning errors
- Illegal building work, such as unapproved extensions
- Unpaid council and water rates
- Survey and boundary defects
- Fraud and forgery
- Registration gaps
- Non-compliance with existing zoning and planning laws
- Third-party claims on the land
On the other hand, it’s the job of your conveyancer to uncover these types of risks linked to legal ownership.
This is why some consider title insurance to be an unnecessary cost.
- Also read:17 Sydney suburbs that are cheaper now than 5 years ago
- Also read:Boom to bust: What makes property prices rise and fall
- Also read:Should you do anything about rising interest rates?
- Also read:City centres are bouncing back – here’s what it means for our unit market in 13 Charts
- Also read:Latest property price forecasts for 2022 revealed. What’s ahead in our housing markets in the next year or two?
Ultimately, it’s your call to make.
There are only 2 title insurance companies in Australia: First Title and Stewart Title Limited.
Title insurance typically costs between $450 and $1,000 in most cases.
So, a relatively small cost but it could be one that protects you from unlikely but potentially very costly misfortune.
Tips: Speak to your conveyancer: Look carefully into the details of your specific circumstances before you settle on the right decision for you.
3. Life insurance
Given that buying a home is likely to be the biggest investment you’ll make in life, it’s no surprise that buying a first home has long been a trigger for getting life insurance.
The right policy can protect large debts and ensure your family is able to continue to fund its lifestyle if something bad happens to you.
In times of high living costs, it’s easy to make the case for life insurance being more important than ever.
For example, it can enable a more comfortable payment of bills such as food and petrol costs if your family were to suddenly be a wage down.
But with life insurance, there are a few important watch out to be aware of.
Mortgage protection insurance is likely best avoided: it’s a product that's fallen out of favour in recent years, including with the Australian Securities and Investments Commission (ASIC).
It’s also a common mistake to assume that any life insurance held within super will cut it for you.
A super fund typically buys life insurance in bulk for large groups of consumers.
On the one hand, this means premiums are often cheaper.
But as is often the case with insurance, cheaper isn’t always better.
Life insurance within super isn’t fully underwritten and this means policies are assessed at the time of a claim.
Unfortunately, this means some individuals won’t be covered by these blanket policy terms.
A Rice Warner report from 2020 showed how big a problem underinsurance was for many in Australia.
It suggested that while an estimated 94% of Australians have life cover, the median cover level is just $143,500.
The report said:
“The default cover of typical superannuation funds does not meet the full insurance needs of many families as the median cover is significantly less than the income replacement level required for death cover and total and permanent disability cover.”
A better option for some will be direct life insurance, which generally tends to cover you for a broader range of events and have higher payouts.
NobleOak and Medibank, for example, offer maximum cover of up to $15 million and $2.5 million respectively.
Tips: When it comes to life cover, generally speaking, look for a payout that covers at least the total cost of your home mortgage and, if you have children, 5–10 times your salary.
Don’t hesitate to speak with a financial adviser to get tailored advice based on your personal circumstances.
Guest Expert: This article was written by James Martin, the insurance expert at Finder.