New home insurance

Getting the right cover when looking for an insurance policy for your new house is very important when you consider the value of the investment you’re trying to protect. Building insurance covers the home building and other permanent structures on your property against insured events, but not your belongings.

More commonly known as home insurance, building insurance can include cover for damage to the walls, roof and floors of your new home, as well as the kitchen and bathroom fixtures and fittings – subject to the limits and exclusions of your existing policy as outlined in the relevant Product Disclosure Statement (PDS). If you took out a loan to build your new home, you might find that building or home insurance is a condition of your mortgage.

Just as important as insuring your newly built home is making sure your belongings are covered, too. Contents insurance can insure against the repair or replacement costs of the furniture, clothing, possessions and décor you bring into your new home.

If your new home is an apartment, townhouse or otherwise part of a larger building or complex, contents insurance may be the only policy you need to have. However, some strata insurance policies may provide some level of cover. Always check with your body corporate and read the policy’s PDS.

For broader coverage, you can have combined building and contents cover on the same policy. A combined home and contents policy insures both the home and your possessions inside it.

The scope of your policy varies depending on your insurer and level of cover. The table below outlines some common inclusions under home and contents insurance policies.

With home and contents cover, you can be covered for loss or damage caused by a variety of reasons (known as insured events). If one of these things happens, you can make an insurance claim to cover the cost of damages, repairs and even rebuilding your house up to your sum insured.

Home and contents insurance can cover:

• Storm damage (including cyclones, hail damage, lightning and rainwater damage)
• Fire damage (including bushfires)
• Theft, malicious damage and vandalism
• Water damage from burst pipes
• Impact damage
• Explosions
• Legal liability (if someone is injured while visiting your property)
• Temporary accommodation (if your home is uninhabitable due to an insured event)
• Some natural disasters (e.g. earthquakes and tsunamis).

For payout limits, terms, conditions, inclusions and exclusions, read your policy’s PDS for the full details.

Most home and contents insurance policies in Australia come with exclusions, where your insurance claim may be denied due to the terms and conditions of your policy.

The exact list of exclusions will vary from policy to policy, but some common exclusions are:

• Corrosion, depreciation and wear and tear of your property or belongings
• Loss or damage to your home if it was left vacant for a period of time or unsecured
• Damage or loss to your home and contents resulting from:
  • Renovations or building extensions
  • Home swapping
  • Structural defects or faults
  • Pet damage
  • Hydrostatic pressure
  • Terrorism, nuclear contamination and acts of war
• Damage or loss caused by actions of the sea (e.g. king tides, storm surges)
• Damage or loss caused by landslide or subsidence (unless caused by an insured event)
• Damage or loss caused by:
  • Mould
  • Vermin or insects
  • Birds pecking or scratching
  • Tree lopping or roots at your home
  • Loss or damage caused by illegal activities
  • Deliberate damage and fraudulent acts.

Ensure you read the key facts sheet contained within your policy’s PDS so you understand exactly what’s included and excluded from your cover. Reading the Target Market Determination (TMD) can also help you decide whether an insurance product is right for you.

The cost of home insurance for your new home with contents insurance will depend on your insurer and level of cover, as well as factors unique to you like:

• The sum insured for your home and belongings (the maximum your insurer will generally pay towards a claim)
• The age, structure and building materials of your home
• The height of the building off the ground, which can affect your flood risk
• The age of the policyholder
• Your claims history
• The address of the home
• Your home’s security features
• If you add optional cover to the policy (e.g. accidental damage or personal effects insurance)
• Your excess (what you pay towards your claim)
• Government charges, taxes or levies relating to your policy.

If you want to get a better idea of how much it might cost to insure your home and contents, you can compare quotes from a range of insurers with our free comparison tool.

As a home insurance policyholder, you can generally choose to pay your home and contents insurance premium for your new home annually or in monthly instalments. When comparing home and contents insurance quotes through our service, you can select which payment frequency you want and easily switch between options to compare the cost.

When deciding on how much to insure your home for, you should first start by estimating how much it would cost to rebuild in today’s economy; one way to do this is by speaking to a professional in property appraisals. Alternately, many insurers have a building and contents calculator to assist.

Here are a few factors to consider before taking out any home insurance policy for your new home:

• Your home’s size, ground slope, design, features, materials and any permanent features like timber floors, patios and carports.
• Internal fittings and fixtures such as taps and faucets, kitchen cupboards, vanity units, light fittings, floor tiles and linoleum.
• Structural improvements, like in-ground swimming pools, awnings, pergolas, decks, fencing and tennis courts.

However, when calculating the value of your home, remember to exclude the land value.

When determining the value of your contents for insurance, it’s important to think about how much it would cost to replace all your possessions and valuable items. This can include clothing, footwear, appliances, furniture, electronics, rugs and curtains, crockery and valuables.

If you’re unsure about how much you should insure your personal belongings for, start by working out what it would cost to replace all your belongings at their current replacement value. Do an annual inventory of every room in your home and list all the items you have, plus their estimated replacement costs. It’s essential to update the list regularly as you add new items and donate, replace or throw out old ones.

While your contents insurance will typically cover your belongings while at home, those items you take with you out of home (e.g. mobile phones, watches and wedding rings) may need further cover if you want to be insured for their loss or damage while away from home. Many insurers offer personal effects cover as an optional extra to your contents insurance, which can cover these instances.

Some lenders may require you to take out a policy to cover the property you’re buying or building with a home loan. You don’t necessarily need contents cover to secure your loan, but you’ll likely need to insure the building with a home insurance policy.

Should your new home be damaged or destroyed, having cover for repair or rebuild costs could prevent a significant financial loss to both you and your lender.

Generally the construction company should have insurance for the work they undertake while the home is being built; this should include insurance for builders and sub-contractors to cover damages if something goes wrong during construction. Make sure to check this with your builders before the work commences.

Once a building reaches the lockup stage, some home and contents insurance can then cover your new home even before you move in.

Some specialty insurance providers can offer home building cover for construction projects. However, if you’re building a new home, it’s worth discussing insurance coverage with your builder, lender or a certified financial adviser.

If you’ve just bought a new home and plan on turning it into an investment property, you can be covered by home and contents insurance for landlords. Landlord insurance covers the building and its fixtures, as well as benefits specific to landlords (like cover for tenant default).

You can also get contents cover if you provide furnishings that can be removed from the home.

Strata property owners typically have to pay body corporate fees, which will usually contribute towards insurance to cover the physical structure of their complex. You may also be able to get building cover for a strata property if you live in a standalone home (e.g. a villa).

However, as a strata resident, you will typically only need to get contents insurance to cover your belongings, whether you own the property or rent it. To see if a policy provides appropriate cover for your situation, check its TMD.

Underinsurance is when you don’t have enough insurance coverage to fully pay for the cost of repairing, replacing or rebuilding your insured home and contents. If your home is damaged or destroyed and you’re underinsured, your insurance payout could be insufficient to compensate for the expenses needed for a rebuild. This could mean that you might have to foot the bill for the remaining amount.

This can happen if you set the sum insured too low or it’s been a while since you updated your policy.

Most home and contents insurance policies are based on the sum insured, but you may come across total replacement cover as an option to add to your existing home or landlord insurance policies.

Total replacement cover provides financial protection for costs to restore your home to its original condition before the event that caused the damage; there’s no set limit per se.

Sum insured cover reimburses you for losses or damages to your home up to a set limit nominated by you (i.e. your sum insured).

It’s important to note that most insurers only offer sum insured cover, so it may be difficult to find total replacement cover. You might want to seek professional advice when calculating your sum insured as building costs are impacted by different factors.