What insurance do you need when buying a home?

Once you have successfully purchased your property, it is important to be aware of any type of insurance that may be necessary to ensure the protection of your new property.  Navigating the insurance landscape can be difficult, in this article we explore the various types of insurance you need to be aware of when buying a home.

When do you need insurance when buying a house?

When buying a house, you typically need insurance to protect yourself, your investment, and meet certain requirements set by lenders or local laws.

Types of insurance when buying a house

Must have insurance

Building insurance

Building insurance, also known as homeowners insurance, covers the cost of repairing or rebuilding your primary residence if it is damaged by fire, flood, or storm damage. It covers the main structure, permanent fixtures and fittings (such as kitchen cabinets, plumbing, and carpet), and other buildings on your property (such as garages and garden sheds). Depending on the policy, it may also cover legal liability for injuries sustained on your property.

Who needs building insurance?

Most lenders will require you to have building insurance before you settle your home loan. This is because they want to protect the property so that it can cover the cost of your loan should the need arise. So, if you’re buying a property you should factor the cost of building insurance into your budget.

Does Strata cover building insurance?

If you have bought a property under strata title, then in most strata schemes the building(s) and common property are covered under the insurance that the Owners Corporation has organised. The cost of the insurance premium is then shared among all of the owners through strata fees and levies. This means you won’t need to organise your own building insurance, instead you’ll likely just need to provide a certificate of currency to your lender (so they know your property is insured).

Make sure to read the product disclaimer

Whilst this isn’t a type of policy, it definitely falls under the ‘necessary’ category. It pays to know exactly what you’re covered for and for how much. For example, some insurance policies cover flood damage, others don’t. Some have a maximum cover amount for personal items like jewellery. Don’t get caught out - ask your insurer about specific scenarios that are relevant to you.

Discretionary Insurance

Contents Insurance

Contents insurance covers the contents of your home in case they are lost, stolen, or damaged. It includes furniture, clothes, jewelry, and electronics. Some policies also cover your contents when taken outside your home, usually for an additional premium.

Who needs contents insurance?

Lenders do not require you to have contents insurance, but it is useful to have, especially if you have expensive items in your home. Anyone can get contents insurance, whether you live in a house or unit and whether you own or rent your property.

Home and contents insurance

Home and contents insurance is a combination of building and contents insurance in one policy, covering both your property and belongings. Combining the two policies into one agreement may mean you only have to pay one insurance premium, and depending on your insurer, you may also be entitled to a discounted rate.

Landlord insurance

Landlord insurance provides cover for landlords who own an investment property. It covers your investment property, fixtures and fittings, for loss or damage caused by tenants and other unforeseen events. Depending on the policy, it may also cover liability, loss of rent if the home is uninhabitable, or your tenant's default. This insurance is beneficial if you're looking to buy an investment property.

Optional extra coverage

Some policies offer optional extras to customize your cover to better suit your needs. It provides the option to add extra coverage for an additional amount if required. While most top policies include these features as standard, it is essential to check for any gaps in full insurance and available options and costs.

Life insurance

When taking out a home loan, you may want to consider how your family will pay for the loan if you pass away. Taking out a life insurance policy to cover your home loan in the unfortunate event of your death could protect your loved ones from financial hardship.

Lenders' Mortgage Insurance

You only need Lenders' Mortgage Insurance (LMI) if you want to borrow more than 80% of your property's value. LMI is insurance taken out by your lender to protect them if you cannot repay your home loan, and the cost is passed to you, the buyer. If you want to avoid paying LMI, you will need to save up a deposit of at least 20%.

^* You have to be a Qantas Frequent Flyer member to apply for the Qantas Home Loan. This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.