What Are the Different Types of Insurance for Property Owners?
The primary types of insurance policies for property owners are building insurance, contents insurance, and landlord insurance. The ideal policy for you will depend on your circumstances. For example, building and content policies help people living in their homes. Landlord insurance exists for homeowners renting their properties out to tenants.
Insurance policies account for a variety of circumstances but have specific exclusions too. Optional extras such as motor burnout cover, flood cover and accidental cover expand the range of protections for policyholders.
Why do I need property insurance?
Property insurance protects your investment and gives you peace of mind. A home is a significant purchase with excellent potential returns. But unexpected circumstances could harm your home and jeopardise your investment. A good insurance policy mitigates financial losses resulting from these unforeseen incidents. Individual policies differ, but there are common trends among certain types of coverage. In addition, cover varies between investment properties and properties used as your primary residence.
What does building insurance cover?
Building insurance covers you for damage done to the structure of your home by insured events. Everything from the frame of the building to the walls and the roof are protected by building insurance. Certain policies even cover external structures on the property, such as granny flats and pools. In addition, lenders often make building insurance a condition for getting a mortgage approved. This is part of why this type of cover is common.
Building insurance policies include protections for a range of risks. For example, they protect from natural dangers like storms or fires and deliberate damage like vandalism. The premium paid for these policies is largely impacted by the presence of smoke and burglar alarms. Building insurance policies also have exclusions, which are important to clarify with your provider. Common exclusions include damage from the sea, new renovations, or illegal activities. Enlisting a property manager to provide regular maintenance prevents wear and tear and limits discussions of exclusions at the time of a claim.
How much does building insurance cost?
The cost of building insurance policies is determined individually for each household. It is primarily based on the amount you insure your home for, your home’s location, the materials of the home, and your excess payments. An experienced rental expert can help estimate your potential costs. Before getting building insurance, you can take steps to lower the expenses. For example, including security features and fixing up areas of the home is helpful. Adjusting your payment may reduce costs by paying higher excess, annually, or bundling policies.
Do I need building insurance if I have body corporate?
You won’t need separate building insurance with a body corporate (also known as strata company). When you own a unit, apartment, or townhouse, it’s common to belong to a body corporate. This group of people jointly own a piece of land but individually own the properties on it. The body corporate usually buys building insurance for the properties within a complex. They would pay for the insurance using the strata fee, which all members are obliged to contribute regularly.
What does contents insurance cover?
Contents insurance provides cover for your personal belongings within your home. If your insured items are damaged or stolen, the cost of repair or replacement is covered by this policy type. Contents insurance applies across the full range of your property, including your back and front yards. If possessions are damaged while used for their intended purposes, they will not be covered. (For example, an oven breaking when warming up your lasagne…) Other notable exclusions for contents insurance include damage from insects or animals, and injury from home renovations. Contents can also include the likes of floor coverings, curtains etc.
What does landlord insurance cover?
Landlord insurance provides cover specifically for homeowners renting their houses to tenants. This contrasts with building insurance, which requires you to be living in the house. Landlord insurance policies include building and contents protections, liability cover, and protection from loss of rental income. Liability cover protects a homeowner legally if any tenants injure themselves on the property. This is valuable to avoid potential lawsuits. Loss of rental income refers to losses incurred by a homeowner due to the inability to get tenants. This is typically due to damage to the property, making it inhabitable. Landlord insurance provides the amount of money a policyholder would receive from rent during this period. This also covers homeowners for tenants defaulting on rent, but only if a property manager has been appointed. This policy does not cover failure to find a tenant due to a challenging rental market.
What optional extras are available for insurance coverage?
Various optional extras exist to enhance your insurance policy. Insurance policies include a range of protections, but they still have their limits. With optional extras, you can include cover for additional events and risks. Optional extras exist for the different types of insurance policies, and their costs vary.
Motor burnout cover
Motor burnout cover is an optional extra for household electrical appliances. It covers repairing or replacing these appliances if their motors burn out. This is distinct from contents insurance, which also deals with damage to your possessions. Motor burnout cover focuses on appliance damage from power surges and electrical current fluctuations. It doesn’t protect against wear and tear, vandalism or other damaging factors. Appliances like washing machines, microwaves and vacuum cleaners are commonly included in these policies. Motor burnout frequently bundles with building and contents insurance policies.
Accidental damage cover
Accidental damage cover protects from sudden accidents in the home. Accidents are tricky to define but are typically considered abrupt, unforeseen, single events that harm your home or belongings. Damage from other factors like faulty craftsmanship, vandalism or pets doesn’t qualify as accidental. Certain items like laptops, mobile phones and remote-controlled devices are also excluded from this cover. Accidents are not typically included in standard property insurance policies, so they are valuable to your coverage – these optional extra bundles with building and contents insurance policies. To be extra sure about accidental damage cover, check the Product Disclosure Statement (PDS). This provides explicit details of what is and isn’t covered under your specific policy.
Portable contents cover
Portable contents insurance covers your possessions when they are not within your home. It extends the coverage of contents insurance by protecting you while you are on the go. Portable contents cover distinguishes between listed and unlisted policies. In an unregistered policy, you have a value limit per item and claim. You do not need to list specific things to claim them. However, many valuable items like laptops and mobile phones are not eligible for this cover. These items require documented policies, which insure specific items for their total value.
Portable and mobile contents cover varies greatly between insurers in terms of locations covered and geographical limits allowed. There is also varying standard coverage for the value of items, and again for valuable items such as jewellery.
Flood cover insures you if a flood damages your home or its contents. Flood has a specific definition for insurance purposes. It refers to runoff and overflow resulting from rivers, creeks, rainwater and similar circumstances. Damage from ocean water flowing into your house does not fall under flood cover. Some home and contents policies include flood cover from the get-go, but often you need to add it separately. It’s also worth noting that flood cover features a buffer period. You cannot claim flood cover for 72 hours after purchasing it. This is to prevent people from claiming flood damage as soon as there is an active flood warning in their area.
Workers compensation insurance covers you against claims by contractors or sole traders working on your property. Claims may be made if they are injured during their work. This will commonly be workers who are doing maintenance or repairs on the property. Workers compensation cover is helpful if you regularly hire sole trades. Sole traders in WA cannot obtain their own workers compensation policy.
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