Thinking about buying or building a property? Building insurance is likely just one thing on your long ‘To Do’ list – but as it’s so important, should you make it number one?
Understanding the hidden costs
Whether the property you’re about to purchase is a home or an investment, if it’s severely damaged or destroyed down the track, the costs of rebuilding or relocating could be higher than expected.
That’s because rebuilding doesn’t just require bricks and mortar. There are many hidden costs, including demolition and debris removal, architects and legal fees, and long-term alternative accommodation.
More than just a good idea
Building insurance isn’t just a way for you to sleep more soundly; it’s a requirement for most lenders before you can finalise settlement on a property.3 Because putting a numerical value on rebuilding can be difficult and potentially time-consuming, it’s a good idea to start gathering quotes as soon as you and the seller have exchanged and signed contracts.
Before you begin coordinating building insurance, however, make sure you arrange pre-purchase building and pest inspections, as pre-existing structural and pest damage usually won’t be covered by insurance if discovered later 4
Also, as well as insuring the building itself, you may need to organise contents insurance (if you’ll be living there), or upgrade to landlord protection insurance to cover house contents being used by tenants. 2
Be a devil for the details
It may be difficult to remember details about a new property when you’re getting quotes from insurers, but these specifics could lower your premiums. 3 Make sure that, along with basics like location and type of property, you note down features like construction materials (timber, brick) and roof type, deadlocks, window locks, alarm systems and other security, pool fencing and smoke alarms. 3 Although complicated and a legal requirement, building insurance is also worth it in the long run. As well as being a great investment in peace of mind, any insurance payments on an investment property are also tax deductible.2
References:
1. ‘Home & contents insurance’, moneysmart.com.au, accessed 3 January 2013.
2. ‘Steps to take after settlement of your property’, whichproperty.com.au, accessed 17 January 2013.
3. ’12 steps to buying a new home’, mmf.net.au, accessed 17 January 2013. 4. ‘Dispelling the myths’, justtermites.com.au, accessed 4 January 2013.
Disclaimer: The information is in summary form and does not purport to be complete. It is intended as a general guide only and is not a substitute for professional advice. The information does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you.
