Insurance – Just a Dirty Word? 4 Key Real Estate Insurance Policies

4 key Insurance policies that everyone should be aware of. (Insert long sigh here) Yep it’s going to be one bloody boring article! And trust me one that has taken all my strength just to start tapping on this evil electronic type writer. Damn you 21st century! And thanks to the glory that is cyber space, soon you’ll have read it and possibly you may want to take a fork to your eye balls….alas I deviate from again what is the inevitable….ho hum

So with all the enthusiasm of a 5 year old on Christmas morning let’s begin. There are so many insurances out there including Car/Motor Vehicle, Life, TPD, Income Protection, Trauma, Home/Building, Contents, Boat, Caravan, Key Man Insurance, Strata and Community Title Insurance, Child Cover, Pet Insurance, Landlord Insurance, Builders Insurance, Business Insurance and I could probably go on for a little while longer by why draw this out…Really when it comes to your abode or investment property you really only need to focus on a few of them. The top 4 are as follows:

1/ Building or also referred to as Home Insurance

This as the name suggests insures your “Dwelling” or “Structure” that is built on the parcel of land against a multitude of misfortunes. The cover will normally insure your dwelling against fire, water damage and anything else that is deemed NOT an act of god. For example; termite damage, some flooding/water damage etc.

*Huge Warning* be wary that not all policies or not all insurance providers are equal! Nor do they offer similar terms and definitions!

It is for this reason alone I implore you to actually take time to research what option and provider is best for your dwelling. You would also be wise to get a few quotes from different providers and compare their definitions. What I mean by this – actually taking an hour out of your day to read their PDS (Product Disclosure Statement)! Finding out exactly what the terms and conditions are set by that provider.

For example “flood” maybe included but what exactly does that particular insurer define as flood? Does it mean you are covered for a pipe that has exploded and now part of your bathroom needs to be repaired or replaced? Or does it refer to a wild storm where you house has been placed under water? Or does it refer to a bank or levy that is breached and now due to an act of god your insurance claim will not be honoured? It may seem all too time consuming but it really is in your best interest to get it right!

Now I must stress there are varying opinions on the timing of taking out an insurance policy, but in contractual law when both parties have signed the Contract of Sale the property is technically the purchasers (with conditions to be met through and including up to the settlement day). I for one would not risk my own personal asset and would take out cover immediately after signing the contract.

Now I know what you are thinking, with so much going on, trying to organize and pay for building inspections, closing costs etc. Insurance is the last thing you want to pay for! But the great thing is all insurance providers have the capability of providing a “Cover Note” until settlement or at the very minimum 28 days. This means you are fully covered until either settlement or the 28 days are up then start paying the premiums either fortnightly, monthly or yearly (whatever payment method you choose).

 

….Are we done yet??…. Ohh look there’s paint drying – I think I’ll go and supervise….

 

2/ Contents

I know what you are thinking, “I wonder if this relates to my belongings?” Winner winner chicken dinner. Yep sure does!

Anything that is not classed as a fixture, fitting or chattel so something that is attached to the dwelling for example curtain rods (but not curtains), light fittings, bath etc. Would not be included in your contents insurance rather these would be included under you Building/Home insurance policy.

Contents items are those that you could easily pick up from one house and place in another like clothes, electronic devices, furniture, rugs, sporting equipment, kids (well perhaps not kids) but you get the gist.

I will add that the amount of people (this is my opinion – and formed by talking to family, friends and clients) that again I fell are under insured is quite outstanding. Do yourself a favour and look at all the items that you have accumulated. Tally up what it would cost you to actually go out and buy those items again if you were to lose them. And I do mean all your items, all the books, electronic goods, clothing, furniture etc. I’m sure it would be more than a quick whimsical guess.

So please do be realistic when organising this insurance as you do not want to under insured!

Did you know that most contents insurance include “Accidental Damage”? This is awesome to have and do ask the question to see if you have it/or if it’s an option. What it means is if you accidentally drop the TV whilst dusting you are covered. Now here’s another little beauty “Accidental Loss”; if you happen to take your possessions out of the home e.g. wedding ring etc. and happen to lose them swimming etc. you are also covered – pretty neat hey!

3/ Landlord Insurance

Landlord insurance – ahhh the one protection that one has over those delightful tenants that choose to either not pay rent or remodify the property in a way that can only be best described as “Pro-Hart on steroids”.

This insurance is a complete must, must have, non-negotiable, cannot live without, ixnay on not having ay… I think you get the point! This type of insurance will insure your investment property/dwelling against the same as Building/Home Insurance, with the added benefit of protecting against loss of income (tenants not paying – not any lack of occupancy). Also any damages that may arise as of a direct result of the tenancy.

Now it’s worth noting that there will be an added benefit of having public indemnity insurance! And don’t forget to nominate a dollar figure for your appliances. For example you may have put a new kitchen in and $20,000 may cover in case of damages. Note: again just an example and you’ll need to figure out your own figures.

On a side note Public Liability is a must! You are far better off having the full $20 million sum insured. For most providers this as default but again double check the fine print! This will protect you from any trades or persons entering your property and hurting themselves.

But wait this little beauty of an insurance policy gets even better!! As I have mentioned in previous articles an investment property should be run or looked upon as a business. And as such Landlord insurance is looked upon as a business expense therefore is… wait for it… 100% tax deductable! That’s right there is a free set of steak knives, thanks Federal Government!  🙂

4/ Builders Insurance

This one is not common and goes unnoticed until something goes wrong. As the name eludes this cover insures you and your property for any construction that maybe happening on the property. This could be anything from renovations, extensions, to a full on build.

If you are hiring any company to carry out the construction ensure they carry the correct builders insurance cover. As they quite often organise this on your behalf. At the time of quotation ensure you ask the question – this will not only save you time but also potentially money.

It’s also worth mentioning that if you are intending to fully gut the property and renovate banks will not lend against such projects unless appropriate insurances are in place prior. This is because they deem it as a high risk. Because if you default on the loan with having nothing but a shell they cannot place it back on the market to retrieve their loses.

There we have the 4 most common insurance policies available when it comes to property. I truly hope this will have helped in some way. Now that this is over if you’ll excuse me there’s a wall I need to bang my head against… why o’ why do I feel so dirty?…

 

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