Consumer advocacy group Choice has released a review of 50 home insurance policies, naming quite a few as being over-priced and under-delivering. So, why be insured?
With escalating costs and so many products – good and bad – on the market, it can be tempting to ignore risks or cut corners (especially for first home buyers). Yet as the season for bushfires and wild weather draws near, scrimping on insurance could end up costing homeowners a fortune.
There are different types of home insurance. `Replacement’ is the most common policy, covering the full cost of rebuilding the home to its original condition, and generally including extras such as demolition costs, architect fees and temporary accommodation costs.
Here are some standard property-related insurance products and what they cover…
– Homeowner’s insurance
A standard homeowner’s insurance policy protects a home owner (and in some circumstances the lender) from financial losses in the event of burglary, fire and certain other types of damage to property or belongings. These policies also include liability coverage, which insures against legal liability if someone is injured on your property.
– Flood insurance
Many property owners don’t realise that damage from floods isn’t always covered under a typical insurance policy. Separate flood hazard insurance can be purchased through most insurance companies. If your property is located in a flood-prone zone, your lender will probably require you to obtain a flood insurance policy.
– Personal property contents insurance
Personal property insurance guards against the theft, damage or loss of household contents separately from real property. Coverage is available for renters and individual property owners, as well as for people who are moving or storing household goods in a self-storage facility.
– Mortgage insurance
Mortgage insurance protects a bank or lender from financial loss if a property owner defaults on a mortgage and the property is sold to repay the loan. If a deposit is less than 20% of the total purchase price of the property, typically the lender may require mortgage insurance. Mortgage insurance may not be required for a mortgage with a higher deposit because the lender normally expects to be able sell the property for more than the loan balance if the borrower defaults on the mortgage.
– Mortgage protection and disability or unemployment insurance
Often confused with mortgage insurance, mortgage life insurance pays the outstanding balance owed on a mortgage if the borrower dies. Mortgage disability and unemployment policies pay a set number of mortgage payments (usually six or 12) if a borrower becomes disabled or involuntarily loses their job.
– Landlord Protection Insurance
This insurance protects against malicious damage caused by a tenant, damage to fittings and fixtures within the property, default of rent, legal expenses and public liability. The annual premium for landlord protection insurance is fully tax deductible for owners of investment property.
Whatever product you choose, remember to also take prevention measures – the installation of smoke detectors, fire extinguishers, dead bolts, security alarms and doors should be considered as ways to decrease risks and lower your insurance premiums.
Before making a final decision, consult with a fully-accredited insurance provider for advice on the products that are most suitable for your circumstances.
CHOICE insurance expert Jodi Bird suggests it is also a good idea to regularly assess how much your insurance is costing you, and see if you can find a better deal elsewhere.
“If you haven’t switched for a while, you’re likely missing out on savings,” says Bird.
