With more subdivided lots popping up across Australia’s capital cities and even in regional city centres, it’s likely that you will own a strata-managed property at some point or another when building up your real estate portfolio.
And given that strata titles utilise combined insurance cover with costs split between all title owners, it’s common to feel some confusion when determining what your personal home insurance needs really are.
So no matter whether you aspire to be an owner occupier or a seasoned investor, you’ll want to read up on the different types of home insurance policies available to you to determine which coverage is most suitable for you and your property.
To help, we’ll be outlining some of the key differences between two of the most confusing types of home insurance policies: building insurance and contents insurance.
Understanding whether you need a building insurance or a contents insurance policy rather than combined cover can help reduce your risks of being over- or under-insured as a homeowner.
Understanding building insurance
What is building insurance?
As its name suggests, building insurance policies are designed to provide cover of the costs for rebuilding or repairing a residential building in the event that that property experiences damage as a direct result of an insured event (i.e. fire, flood, storms, electrical faults, theft, vandalism, etc.).
Alongside covering damage to the property’s exterior, building insurance also provides cover for all permanent fixtures installed on that property.
This means your building insurance policy should cover damage to fixtures like kitchen cupboards, light fittings, built-in appliances like ovens, and even garages, carports, fences, and other external fixtures to your property.
Most insurance providers offer add-on options for their building insurance policies, ensuring that policyholders can customise their building insurance cover to better accommodate their property’s unique fixtures and even building design elements like rare architectural features. Building insurance policies also typically don’t offer accidental damage cover, however some insurance providers may offer this as another optional extra.
Who needs building insurance?
Whilst building insurance and strata insurance are often used synonymously, there are actually some key differences between these two insurance types.
For starters, building insurance is typically designed to provide cover for just one residence and its own private permanent structures (i.e. garages, sheds, granny flats, private pools, etc.), rather than multiple privately owned residences.
Contrastingly, strata insurance is typically designed to include cover for common areas (i.e. elevators, driveways, shared walls/floors/ceilings, gardens, elevators). Most strata insurance policies also provide liability cover in the event that people are injured on common property.
This is one of the many ways that strata building insurance for apartments is different from house insurance.
So who needs building insurance if strata building insurance already covers strata title owners? Individual building insurance policies are a valuable investment for homebuilders and renovators.
By securing a building insurance policy during renovation or rebuild projects, you can rest assured knowing that your property is covered in the events of environmental damage.
And once your home build or repairs are complete, policyholders will have the option to update their building insurance policy to reflect the new value of their newly rebuilt or renovated home, or they can opt to combine their building policy with contents insurance cover prior to or upon moving back in.
Average costs of building insurance in Australia
As building insurance is designed to provide cover for the total costs of repair or rebuild of a residential property, the total sum of insured value for these insurance policies is typically going to be far higher than the total insured value of contents cover.
In fact, it’s been estimated by industry analysts at Canstar that the average coverage of building insurance in Australia is between $300,000 and $1.2 million. Comparatively, the average total insured value for most contents insurance policies across Australia is under $50,000.
With average total coverage of $300,000 – $1,200,000 for building insurance policies in Australia, the average cost of building insurance premiums is between $1,200 – $4,000, depending on the size and value of the insured structure.
Understanding contents insurance
What is contents insurance?
Whilst building insurance provides cover for the structure and permanent fixtures of a residential property, contents insurance instead provides cover for personal belongings like furniture, non-fixed appliances, homewares, and other personal effects stored in your home (i.e. clothing, personal technology, kitchenwares, etc.).
Contents insurance can also provide cover for the cost of repairing or replacing personal items in the event that they accrue damage due to an insured event (again, fire, flood, theft, electrical faults, etc.). And just like building insurance, your contents insurance cover can be amended to provide additional cover for accidental damage or for valuable items like jewellery.
Who needs contents insurance?
As strata insurance already provides cover for buildings and their permanent fixtures, strata title owners don’t actually need to secure individual building insurance policies for their property. Instead, strata title owners can secure their own contents insurance policy with an insurance provider of their choice.
And if you’re renting rather than owner-occupying, you can secure contents insurance in the form of renters insurance.
This specialised contents insurance policy is designed specifically for renters, providing liability cover in the event that a claim is made against you for an incident that causes damage to the property, as well as standard new-for-old contents insurance cover.
Average costs of contents insurance in Australia
As we mentioned earlier, the average total insured value for contents insurance policies in Australia is under $50,000, according to analysts at Canstar.
This ultimately means that the average costs of premiums for contents insurance policies in Australia can be anywhere between $300 – $1,000, depending on the total sum of insured value as well as the location of your property.
However, whilst properties located in an area with a high crime rate may incur higher policy premiums, policyholders may also be able to lower their contents insurance costs by fitting their home with modern security systems like deadbolts or even smart camera systems.
Existing security features are one of variables that insurance providers may consider when conducting their own internal risk assessments prior to finalising your policy.
Do you need combined building and contents insurance?
Typically, consumers who require combined building and contents insurance cover secure a home and contents insurance policy.
These policy types are suitable for owner-occupiers who own a standalone property that isn’t strata managed. If you own a strata title, however, then chances are you’ll only require a contents insurance policy as your strata insurance plan will include building cover.
Want more information on all the different types of home insurance or want to know how you can save on your home insurance policies? Then check out our other insurance write-ups and spend savvy stories here at Soho.
