There’s a very good reason why buying a property is a stressful process as well as an exciting one: for most of us it’s the single largest purchase we’ll ever make.
Whether yours is an investment or a place to call home, you’ve saved hard to afford it and you’ll be working hard to pay it off. So you certainly don’t want it damaged and requiring costly repairs, or risk losing it if faced with unexpected illness, injury or even death.
This also applies to the belongings you’ve chosen to fill your home. They’re yours, they’re precious to you, and should they be damaged, lost or stolen, you’ll want to be able to have them repaired or replaced.
Insuring your home and its contents, protects the lifestyle they give you and your family, while sparing you the financial distress of losing your most precious possessions if something bad were to happen. But only if you have the right type and amount of insurance for your circumstances.
Why the type and amount of insurance matters
Insurance can seem like just another cost on top of your mortgage – which explains why a 2013 report prepared for the Insurance Council of Australia found most Australians choose their insurance based on affordability rather than coverage. But that approach can leave people short if they have to claim on their policy.
For example, past bushfires have destroyed many houses where the owners were not covered for fire damage, leaving them with the challenge of coping with that loss while needing to finance new housing.
Making sure you’re covered for natural disasters is critical if you live in a vulnerable area, but none of us is immune to accidents, burglaries, heavy rains, strong winds or hailstorms.
As well as these more tangible risks, what would happen to your family if unexpected illness, injury or even death made you unable to cover your mortgage repayments?
It’s not about expecting the worst. It’s about being informed, prepared and protected against risk.
The type of insurance that’s right for you will depend on your circumstances – including your life stage, whether you’re single or partnered, and whether you have dependents. So do some research and then seek advice if you need to before deciding how best to protect your home and family.
Here are a few different types of insurance of particular relevance to homeowners.
Home insurance (or building insurance) protects you from the costs of repairing or rebuilding your home if it’s damaged or destroyed by certain specified events, which can include natural disasters as well as accidental or deliberate human-related damage.
Contents insurance does the same for the items inside your home if they are damaged, lost or stolen (under specified circumstances). Homeowners generally take out home and contents insurance as a bundled package, but it’s also possible to take them out separately.
Landlord insurance protects you from the costs of repairing or rebuilding your investment property – and may also cover lost rental income – if it’s damaged or destroyed by certain specified events, which may include bad tenants.
Life insurance is another important consideration for homeowners: it’s another way of protecting your family from financial distress if you were to pass away.
Income-protection insurance keeps a portion of your income coming in, if you become unable to work due to a serious illness or injury, which can help you stay on top of the bills while you recover.
Critical illness, or trauma insurance protects you and your family from financial distress should you be affected by certain specified serious illnesses or injuries.
Reviewing your insurance
Taking out the right type of insurance is step one. Equally important is reviewing it regularly – the Insurance Council recommends doing this annually, when your renewal notice arrives – to make sure your coverage keeps up with your changing circumstances and priorities.
The Council’s report found that one-third of Australian homeowners had not updated their contents insurance to cover possessions acquired since they took out their policy, and that more than 80 per cent were underinsured – meaning they didn’t have enough cover to “resume their same standard of living in the event of a crisis”.
So make sure:
- you get the protection you need
- know exactly what you’re covered for
- regularly review and update your coverage.
With that peace-of-mind you can get on with enjoying the home and lifestyle you’ve worked so hard to secure.