Amid all the excitement of buying your first home, there's one important matter you mustn't forget to arrange before exchange of contracts: insuring your new property. As soon as your offer has been accepted by the vendor it's advisable to start gathering quotes on home and contents insurance and to lock in a home insurance policy that will be active from the day of settlement.
This is important not only to protect yourself from loss, but also because one of the conditions of most mortgages is a requirement that you have adequate building insurance cover. In all likelihood, you will need to send the policy details to your lender in order for your loan approval to be finalised prior to exchange of contracts.
What is a home and contents insurance policy?
Most home insurance policies cover both the building itself and your possessions (the contents). The policy should cover the cost of repairing or rebuilding your home in case of natural disasters or accidental damage and also loss or damage to your possessions.
Most standard home insurance policies do not cover flood damage, but if you are buying in a flood zone, cover may be available for an additional premium.
Some other potential problems, such as damage caused by electrical failure, may also not be included in the standard cover but can be added at your request.
How to decide how much cover you need
Before you look for quotes on your home and contents insurance, you will need to calculate how much cover you will need.
For building insurance, you will need to calculate the cost of rebuilding your home in the event of a total disaster. Remember that this is not the same amount as you paid for the home, as this includes land value. Be careful not to underinsure, especially if you are buying in a high-risk bushfire or cyclone area.
For your contents insurance, you will need to calculate the replacement cost of all your possessions. Make a list of everything, not just valuables. Articles like clothing, bedlinen, kitchen goods and even your CD and DVD collections can add up to a sizeable amount. If you own any items of significant value, most policies will allow you to insure these separately for an extra premium.
How to save money on home insurance
There are several ways you can look at to save money on your home and contents insurance, including:
Bundling your home and contents insurance with other insurance you already have, such as car insurance, may lead to discounts
Look for online only discounts
Pay your premium on an annual rather than monthly basis
Set a high level of excess you are willing to pay upfront if you need to make a claim. The higher the excess level you agree to, the lower your insurance premium will be.
So be prepared to have your home and contents insurance sorted before exchange of contracts and also check with your insurer if the insurance covers your contents during removal to your new home (this is usually the case if you are using professional removalists).
Once you have moved into your new home, you can rest easy in the knowledge you are covered for any number of eventualities life could throw at you, but be sure to update your policy on an annual basis or if you make an expensive purchase that needs to be added to your contents cover. For more information regarding your first home purchase, please don't hesitate to get in touch with a member of the friendly Century 21 team today.