You have invested a lot of money in your Australian property, so its worth spending a little bit extra maintaining the appropriate insurances for your property. Here are the insurances every Australian property owner should be considering.
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If you own a free-standing house you should ensure you take out building insurance. Building insurance covers the cost of rebuilding or repairing damage to the structure of the building such as the walls, roof and floors as a result of events that are beyond your control (usually including storms, floods, and bushfire). It usually also covers damage to permanent fixtures and fittings as well, and also other structures on the property such as sheds, fences, garages, pools and granny flats.
Insurance companies will either offer total replacement cover or sum-insured cover.
- Total replacement cover – includes all the costs to rebuild your home to the standard it was prior to an event. This reduces the risk of under-insurance whereby you insure for a fixed amount that is insufficient to cover the costs of rebuilding or repairing the house.
- Sum-insured cover – is the type of insurance most of us are familiar with. Sum insured cover will cover you up the agreed amount to repair or rebuild the home.
For properties that are part of a strata scheme, the strata manager is usually responsible for maintaining building insurance for the entire complex. The strata owners usually agree the amount to be insured each year, and the strata manager organises the policy. When purchasing a property in a strata complex, Milk Chocolate Property Concierge (as part of their services) checks to ensure the policy is current and the level of insurance is adequate.
Contents insurance covers the personal possessions you keep in your home. Contents insurance will generally cover things like furniture, electrical equipment, computers, clothes, and jewellery. If you are living in the home yourself, you would usually take out a combined home and contents insurance policy.
If you are renting out your property, you may not at first glance think you need contents insurance if you are renting your house unfurnished. However depending on the wording of your building insurance policy, the building insurance may not cover items that can be readily removed from the house such as dishwashers, curtains, floor coverings etc. You may also be able to cover these ancillary contents as part of a landlord’s insurance policy, which we discuss next.
Landlords insurance is an insurance policy that covers a property owner from financial losses connected with their rental property. Some landlords insurance policies are sold as stand-alone policies (often through the property management company), or can be tacked on to an existing building or home and contents insurance policy. Depending on the policy you may be able to elect the level and extent of the insurance cover.
Landlords insurance will generally cover you for such things as rent default (if the tenant fails to pay rent), loss of rent (if your house becomes uninhabitable and you are unable to rent the house – eg. storm or fire damage to the property), and malicious damage to the property caused by the tenant.
When evaluating the financials of an Australian property purchase, Milk Chocolate Property Concierge always include the cost of landlords insurance.
Life Insurance and Income Protection
When you make a large financial commitment it is not only important that you insure the asset that you have acquired but you also consider whether you need to insure the person who’s income earning capacity is being relied upon to fund the property acquisition. You should ask yourself, if the primary income earner was to die or be seriously injured, would you realistically be able to retain your property investment. Life insurance can cover you in the event of death or a serious accident and income protection insurance can cover you for loss of income for a certain period of time due to serious injury or illness.
All insurance policies discussed above have various exclusions, limits and other conditions which vary between insurers. So, its important to read and understand the product disclosure statement (PDS) when comparing different policies.
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Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.