5 key questions to ask before buying home insurance

Our comfort, security and wellbeing often depend on our ability to maintain a roof over our head. This is why choosing the right home insurance can offer all-important peace of mind. Insurance is essential for protecting your house from floods, fire, theft or water damage – events that can spell disaster for your most important asset.

Forms of cover

Although there are various products on the market, most home insurance providers will offer you two types of policy: building insurance, which covers the ‘bricks and mortar’ aspects of your home, and contents insurance, offering protection for items such as furniture, electrical appliances and other valuables. Ideally, you should choose an insurance product that covers both.

When choosing home insurance, you need to decide whether you want total replacement cover or sum-insured type of cover. Total replacement cover incorporates the costs associated with rebuilding your home to its prior standard, while sum-insured cover will only compensate you for the set amount. For example, ANZ Home Insurance offers full buildings replacement cover which also covers the cost of architects, surveyors and legal fees. The types of insurance vary slightly, so it pays to read the fine print. Also be aware that if your insurance covers less than 90 per cent of any rebuilding costs, you are considered under-insured.

Ask the right questions

Before you purchase home insurance, it’s important that you arm yourself with the right questions. Here are five things you should ask your insurance provider before signing on the dotted line:

1. What kind of insurance policy do I have and what exactly is covered?

Whether you opt for building insurance or decide to combine home and contents, it’s not enough to simply select a policy without being aware of the extent of your cover. Make sure your insurance provider offers a detailed overview of items covered and make sure you understand what the limits are. Some insurance products offer cover even for belongings that you take outside of your home, see for example contents insurance with ANZ.

2. Does my policy provide comprehensive coverage of my home and contents?

In addition to selecting the right policy, it’s equally important that your house is insured for what it is worth. Many studies show that the majority of consumers were underinsured at time of loss, a fact owed to customers’ incorrect estimations of rebuilding costs. When calculating the cost of rebuilding your home, it’s essential that you choose a web calculator that asks comprehensive questions.

3. Does the insurance product offer full building replacement cover?

If you lose your house in a flood or earthquake, the rebuilding costs can be staggering. Make sure your policy includes full building replacement cover (as already mentioned ANZ Home Insurance does) – including costs such as architects and surveyors, as well as any legal fees incurred.

4. Does my policy cover water damage and flooding?

Although the majority of home insurance policies will bear the costs of flash flooding, many won’t cover damage from riverine flooding. The definition of flooding varies. Surprisingly, floods rank ahead of bushfires as the country’s most prevalent natural disaster – this is why it’s crucial to address this in your insurance policy if you live in a flood-prone area.

5. Should I consider any optional extras?

Some insurance policies charge for optional extras, such as accidental damage to buildings and cover away from home, but some products incorporate these. It pays to think about the risks you’d rather not take when committing to an insurance policy.

Given that it can take a lifetime of hard work and financial sacrifice to establish a home, it’s vital that you take the time to choose the insurance that best meets your needs.

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