Ever wondered what happens if your home is so badly damaged by an accident that you have to move out? Who pays for your accommodation? Will it be in your neighborhood? And are there any guarantees it will be big enough for you and your family?
In this article, we take a closer look at insurance in conversation with Josh Hawkins from Brookvale Insurance Brokers.
Whether you own a home, an apartment, an investment property or you are renting, Josh helps you understand what insurance you need (and don’t need!) and what you’ll be covered for in the event things go wrong.
Josh, can you start by giving us an overview of what insurance a homeowner should typically consider?
When it comes to home insurance, there are a few key things people should consider. For most homeowners – and this is general guidance only, not personalised advice – a standard home and contents policy is typically what’s needed. This type of policy covers both the building itself and the contents inside.
Within a home and contents policy, there are some items you might think would be including as part of the building but are actually classified as contents, such as blinds, light fittings and loose floor coverings. It’s important to understand the distinction so that you know what you’re covered for.
There are two primary types of home insurance policies to consider. The first is a defined events policy, which provides coverage for specific events such as fire, theft, storm damage, flood, lightning strikes, earthquakes, etc.
The second type is accidental damage coverage, which protects you from everyday mishaps. This can come in handy say if your TV accidentally falls off the wall, red wine spills on the carpet or you leave your laptop on the car roof and drive off.
It’s important to carefully assess your needs and consider factors such as your location, the value of your home and belongings, and your specific circumstances when determining the right insurance coverage for your home.
How do you work out how much to insure your property for?
That’s a great question. Determining how much coverage you need is a crucial decision.
In many cases, when you buy a property, your lender will require a minimum sum insured which is sometimes specified on the valuation report.
However, relying solely on this may not provide adequate coverage. Typically, the bank deducts the land value from the purchase price and considers the remaining amount as the replacement cost for the home, but this can result in being underinsured.
To accurately determine the appropriate coverage, it’s recommended to have an insurance professional or qualified evaluator assess your property. They can inform you about the exact cost of replacing your property. Another option is to consult a builder who can offer an estimation of the replacement cost. Additionally, there are online calculators available that can provide some guidance.
What happens in the event your home is destroyed – where do you live?
When a home is damaged to the point it becomes uninhabitable, most insurance policies include coverage for alternative accommodation.
While I cannot speak for all policies, it’s common for them to provide a minimum of 12 months coverage for alternate accommodation. Some of the higher-end policies will offer 24 months of housing replacement which can be helpful, particularly in places like the Northern Beaches where build times can easily extend beyond 1 year.
Initially, insurers often offer emergency accommodation to ensure your immediate housing needs are met. Once the extent of the damage and the estimated time for repairs or rebuilding are determined, insurers will provide a more permanent and affordable solution that is similar to your current living situation.
Are some homes ‘uninsurable’ due to extreme bushfire or flood risk?
There are situations where a home can become uninsurable, although fortunately, we haven’t encountered that scenario yet. In our experience, we have been able to find solutions for our clients through the direct market or by exploring other options. However, it is important to note that in bushfire-prone zones, the number of insurers available can be significantly less. In some cases, half or more of the insurers may not offer coverage for properties in these types of areas.
The availability of insurance coverage can also be influenced by the value of the home and the cost to rebuild it. Generally, if the home is on the lower end in terms of replacement value, it may be easier to find coverage. But as the value of the home increases, the pool of insurers willing to provide coverage drastically diminishes. We have encountered cases where only one insurer was willing to cover a particular property, leaving the homeowner dependent on that insurer’s terms and conditions.
Can you explain Landlord insurance and why it’s worth getting if you own an investment property?
Landlord insurance is an essential consideration for investment property owners who have tenants residing in their properties.
Similar to building policies, it covers the physical building itself if you own a standalone property or a unit that is leased out. It also includes coverage for contents, which encompasses things such as fixtures, fittings, and other permanent items within the property.
What sets landlord insurance apart from a regular home and contents policy is the inclusion of specific coverage for rental-related scenarios. One such coverage is loss of rent, which compensates landlords for the income lost when a property becomes uninhabitable or when rent needs to be reduced temporarily during repairs. Another crucial aspect is rent default, which safeguards landlords against tenants who abruptly cease paying rent without formally terminating the rental agreement.
The policy also typically covers you if tenants continue to occupy the property without paying rent. It may offer legal assistance and coverage for eviction costs incurred when property managers need to navigate the legal process of removing non-compliant tenants.
Theft by tenant is another vital component of landlord insurance. It protects against theft or damage caused by tenants, which can encompass various items such as fixtures, fittings, and even bespoke cabinetry.
Are landlords covered for damage caused by pets?
Some policies explicitly exclude pet damage, specifically scratching, tearing, and biting of carpets, walls, and other contents and building items. Unfortunately, this can leave landlords at a disadvantage.
Certain policies may offer limited coverage for pet damage, usually up to a few thousand dollars. However, an excess would apply, and the coverage is not as comprehensive as for other events. It’s crucial to review the specific terms and conditions of individual policies to understand the extent of coverage provided.
Should I have insurance if I am a tenant?
As a tenant, it’s crucial to have insurance coverage for your personal belongings and liabilities. Whether you are renting a house or living in a strata building, you should consider obtaining contents insurance to protect your possessions. This includes items such as your furniture, appliances, clothing, personal effects, and any portable items you may take outside of your home. It’s also important to ensure high-value items like jewellery are adequately covered.
Additionally, having coverage for your legal liability is essential. Accidents can happen, and if you unintentionally cause damage to the landlord’s property, you may be held liable for the costs. This could result in receiving a bill from the insurance company or the landlord themselves. In some cases, the landlord may request that you arrange for the repairs to be done before the lease ends. In such situations, having an insurance policy in place can help you navigate the process and determine what you’re eligible to claim.
Want to get in touch with Josh? Head to https://bib.com.au/