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What are the benefits of house insurance?

How can home insurance help protect your investment 171 83091 0 14101217 300

Getting house insurance is often a requirement of taking out a home loan if you are buying a house in Australia, but there are many other benefits of this insurance, aside from helping you obtain financing.

Home insurance means your investment will be protected should certain unforeseen acts occur. While not everything bad will be covered, it does make bricks and mortar a less risky asset. 

Home insurance provides protection

Insurance policies provide a way to give you peace of mind so if something unforeseen - such as a storm, explosion, earthquake, falling tree, cyclone, flood or fire - occurs, you can claim for any damage to your home.

You will not need to pay for the entire cost of damage to fix your home, but rather only cover the excess.

Why protect your equity?

Buying a home is one of - if not the largest - investment most people will make in r their lives. This means it is important to protect the equity in your asset. This is the price of your property above the mortgage and other liabilities, essentially it is the difference between what it is worth and what you owe on it. Having insurance can mean you are protecting your investment, including the equity.

Since you can use the equity in your home to purchase a rental property, it is a great way to build wealth. You may be able to benefit from tax advantages. Not only that but residential investment properties may provide investment security, rental income and capital growth. 

Having insurance means you will not need to start from scratch again if something were to happen to your home, damaging your equity.

Less stress

In the event of a natural disaster or other event, having insurance means you would not need to stress about the condition of your home and how you could afford to fix it or replace it. Depending on how comprehensive your policy is, it may cover the cost of rebuilding your home and pay for temporary accommodation during that period.

This is why it is important to regularly check to ensure your coverage is up to date. If you have undertaken any renovations or constructed any additions it is important to let your insurance company know. This way you will be recompensed for the correct amount should something happen.

Peace of mind

If nothing else, home insurance can give you peace of mind. Not everyone with this kind of insurance will need to make a claim, but it is good to know it is there should you require it.

This means you may not suffer potential financial devastation, as your investment is protected.

Why should you consider a joint home and contents policy?

A home insurance policy will cover the dwelling itself but not all your personal possessions. This is where contents insurance comes in. This means you can make a claim for any items that are damaged under the conditions specified in your policy. This includes your appliances, furniture, clothing and other possessions. If you have any items of particular value, such as artworks or jewellery, you may need to specify them separately to ensure you get the correct level of cover.

However, it is important to find out whether your policy covers the actual cash value or a replacement cost. This is the difference between what the item is actually worth on the market and the cost to replace the item new.

Your home and contents insurance may also pay for the cost to replace items if your home is burgled. Make sure you keep an inventory of items so you can show your insurer if you need to make a claim.

How can you make sure you receive all the benefits of your home insurance policy?

When you first organise a home insurance policy, it is essential to compare your options. Different providers may offer slightly different options for your needs and it is important to read through the fine print.

Many insurance policies will cover you for fire, explosion, floods, storms, accidental breakages, actions of the sea, lightning, theft, burglary, malicious damage, damage from impact such as tree falls, leaks, and removal of debris. Earthquake damage and damage by animals are items that are not always covered, so it pays to read the fine print. 

You should also double check whether your policy covers alternative accommodation costs if you can no longer live in your home and discover the value of this service. 

There are a few ways to lower your policy, such as increasing the excess. This means your premium will be lower but you will need to pay a higher out-of-pocket expense if you do need to make a claim.

Installing security measures such as deadlocks and alarms may also help you to reduce your premiums, but you would need to discuss this with your insurer.

Posted by Richard West.