Buying Your First Home? Here’s How to Sort Insurance

July 29, 2022
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Figuring out what insurance you need as a first home buyer can be confusing and a little overwhelming, but it doesn’t need to be.

Here are the answers to 4 frequently asked questions first home buyers have about home insurance.

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1. When do you need to take out home insurance?

While it’s not a legal requirement and the rules differ slightly between states, most mortgage lenders will request that you take out home insurance before settlement.

This is because most lenders will require a Certificate of Currency as part of your mortgage application which confirms that you have a home insurance policy in place. 

This ensures you and your mortgage lender’s investment is protected. If something goes wrong before you move in – for example, a burst pipe damages the property – your home insurance policy can pay for repairs.

2. Do all homeowners need home insurance?

Buying Your First Home? Here’s How to Sort Insurance

Apartments, unit and townhouses

You aren’t generally required to take out home insurance if you live in an apartment, unit or townhouse.

This is because insurance is included in your strata fees. You will still need a Certificate of Currency but your conveyancer should be able to get this from strata.

Keep in mind that strata insurance only covers the building. If you want to protect all of your belongings, you’ll need contents insurance. The same rules apply for landlords

Freestanding houses

Unlike strata buildings, if you’re buying a freestanding house, it’s down to you as the property owner to take out home insurance.

A home insurance policy can pay to repair or rebuild the building if it’s damaged or destroyed by an insured event such as a fire or storm. 

If you also want to protect your belongings, from the furniture and whitegoods to the electrical appliances, then your best option is a combined home and contents insurance policy.

3. What should your home insurance policy cover?

All home insurers typically cover:

  • Fires (including bushfires)
  • Storms and lightning
  • Theft and attempted theft
  • Escape of liquid (for example, a pipe bursts and causes water damage)
  • Malicious damage

Live in a flood zone?

Buying Your First Home? Here’s How to Sort Insurance

Insurers generally cover most major weather events such as bushfires and storms. However, a very small number do not automatically cover floods.

If you’re moving to a house that’s in a flood-prone area, it’s worth making sure this is added on to your policy. 

Before you buy, it’s a good idea to check if the property you are interested in is in a flood zone or bushfire area. To do this, check the area’s local council website. These states also have flood maps:

If it is in a risky area, it’s likely your insurance will cost more. This shouldn’t necessarily deter you from buying, but it’s worth factoring in the additional costs to your budget. 

To find out how much you may pay, it’s worth getting some free online quotes from a few different insurance providers.

4. How much home insurance do you need?

When you take out home insurance, you’ll be asked how much you want to insure your property for. This is sometimes called the sum insured.

Your sum insured is the amount of money it would cost to rebuild your new home from scratch if it was totally destroyed.

Working out your sum insured

Unfortunately, the cost of building a house isn’t the same as the amount you just bought your property for so you can’t rely solely on that number, but it can help. 

Online building insurance calculators are another good way to estimate your rebuild costs – just make sure the calculator you use factors in the current cost of building materials.

Watch out for underinsurance

As a first home buyer, it may be tempting to lower how much your home is insured for in return for slightly cheaper premiums, but it’s not worth the risk.

For example, say you insure your home for $600,000 but it actually costs $800,000 to rebuild. If it was destroyed by a fire or other insured event, you could be $200,000 out of pocket.

To make sure this never happens, re-evaluate the rebuild cost of your home every year. 

Gary Ross Hunter
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 5 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald,, The Telegraph, Explore Travel and Escape. Gary holds a Kaplan Tier 1 General Insurance (General Advice) certification and a Kaplan Tier 1 Generic Knowledge certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
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