A home buyer’s guide to taking out home insurance

When you’re budgeting to buy your own home it’s important to consider all the upfront and ongoing costs of home ownership. One cost you mustn’t overlook in the excitement of buying a home is insurance. You will likely have a lot of questions, and this guide can help to steer you in the right direction.

Why do I need home insurance?

For most people, buying a home is the biggest investment they’ll ever make, and repaying a home loan is a long-term commitment. To protect that investment from unexpected events like fires, storms, or accidents, home insurance is essential – and most lenders require proof of coverage before approving a loan.

When will I need to get home insurance?

Once you sign a contract, you have a legal interest in the property. That means you should have insurance in place right away, to cover any unexpected damage.
If you apply for a loan through HomeStart, you will need to show us that you have insured the property. An insurance certificate of currency will need to be provided to us as part of your home loan application.

Who is responsible for insuring my home?

There are essentially two types of property titles in South Australia; Torrens title and strata/community title.

Torrens title is the most common form of title, usually characterised by freestanding houses – you’ll need to arrange your own insurance for a Torrens title property.

The other possibility is strata/community title; these are usually apartments, units or town houses. These titles are created under a strata or community plan, and managed by a strata manager or body corporate that is usually responsible for arranging the building insurance for all the unit holders collectively (you can obtain the certificate of currency from them).

What does home insurance cover?

Insurance can cover your home and its contents. You will need home insurance to cover the building and fixtures, and contents insurance to protect your personal possessions. It’s only the home insurance that we need to review during the loan application process.

Is all home insurance the same?

There are two main types of home insurance – sum-insured insurance and total replacement insurance.

Sum-insured is a type of cover that insures your property to an agreed value; usually this is the estimated cost to rebuild your home in case of total loss.

Total replacement cover is cover for what it would actually cost to repair or rebuild your home to the same standard. Total replacement is less common and often more expensive.

How do I work out how much home insurance I need?

The cost to rebuild isn’t the same as the sale price, because the value of the land usually makes up a substantial part of the sale price. Insurance providers often offer online tools to calculate how much it would cost to replace your home if it were destroyed. Property valuers can also inspect your property and provide this sort of information for a fee.

How can I keep insurance costs manageable?

The best way to manage insurance costs is to shop around, revisiting your policy every couple of years and maybe even changing insurers periodically. Most insurers offer flexible options, and incentives such as multi-policy discounts (you may need to insure a car or two and a boat perhaps).

How can I find the right policy for me?

Insurance brokers can help you find policies that suit your needs, or you can do the searching yourself. Getting quotes and product disclosure statements (PDS) from more than one insurer will help you when it comes to comparing policies.

The Australian Government’s moneysmart website recommends comparing the features of each policy including premium, excess, exclusions, legal liability cover, extended cover, and cover limits.

You can find more information at moneysmart.gov.au/home-insurance