Every homeowner or property owner needs to have building insurance in case something happens to their building that may need rebuilding. After all, natural disasters are now quite common, so building insurance is designed to cover your home if disaster strikes. The good news is that many insurance companies offer building insurance. But before you buy building insurance, you need to understand what it is all about. This article discusses the key things you should know about building insurance.
Understanding building insurance
Your home and other investment properties are usually your most significant assets, so protecting them is a good idea. And building insurance, also called home-only insurance, does this by helping you cover the expenses of replacing your property in case it’s destroyed. It can also cover the costs of repairing your damaged property. It also usually covers permanent fixtures and fittings like garages, kitchens, sheds, and fences.
A wide range of events, such as certain types of flooding, fire, riot, explosion, storm, earthquake, and vandalism, can cause damage to your property. Therefore, some building insurance, like comprehensive building insurance policies, can also cover costs like a legal liability. Legal liability costs are crucial when compensating someone who gets injured on your property. Other costs include counselling services, emergency repairs, temporary accommodation, clean-up fees, and building modifications.
When choosing an insurance policy, you must look for what matters to you. For example, if your concerns are about damages due to destructive bushfires or summer storms, you must ensure the policy can fully protect you from these risks.
Why you should have building insurance
Many home loan lenders need clients to access home insurance as one of the conditions of approving the loan. Regardless of whether or not you have a property without a mortgage, it’s still crucial to insure it as it is usually your most important and significant property.
When you consider how much you can insure your property, you should remember that the cost you paid for the property and the cost of rebuilding it are different. The major value of a property is the land, and building insurance covers the labour and materials required to rebuild the home.
Therefore, the sum insured can meet the total cost of rebuilding, such as fittings, structural improvements, and fixtures replacement, but it excludes the land value.
Some insurance companies allow property owners to choose total replacement cover instead of the sum insured. This usually takes care of the value of rebuilding your property. On the other hand, the sum insured can make it your responsibility to come up with the cost to rebuild.
Above all, you don’t need building insurance if you intend to purchase a strata title apartment because residential strata insurance covers it. The cost of this insurance cover is often included in your building levies. But you may have to get contents insurance to cover the belongings and other items not covered by the strata insurance.
