What you need to know about insuring your first home

By Mozo ·

You’ve found the property of your dreams, got the home loan sorted and have the settlement date circled in red on the calendar. What else is left to do than pop the champagne corks? Get insurance, that’s what. Here’s what you’ll need to know.

If you have been renting you may already have contents insurance for your belongings, but as a homeowner you’ll need to think about building insurance. Actually, you’ll need to do more than just think about it as you’ll generally find that one of the conditions of your new mortgage is to have adequate building insurance coverage.

Home Loan Comparison Table - last updated January 22, 2021

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • Smart Booster Home Loan

    1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a.variable for 12 months and then 2.48% p.a. variable
    2.47% p.a.

    A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required.

    Compare
    Details
  • mozo-experts-choice-2020
    UHomeLoan - Discount Offer

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.34% p.a. variable
    2.34% p.a.

    Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.

    Compare
    Details
  • mozo-experts-choice-2020
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.19% p.a. variable
    2.19% p.a.

    Fast online application with no fees. Free extra repayments and redraw facility. Min 40% deposit. Crowned Best New Home Loan for 2020 by the Mozo Experts.^

    Compare
    Details
  • Special Offer Reward Me Fixed Rate Home Loan

    Owner Occupier, LVR <80%, 300k+

    interest rate
    comparison rate
    Initial monthly repayment
    2.04% p.a.
    fixed 2 years
    2.79% p.a.

    Enjoy $3,000 cashback when you refinance with Virgin Money (T&Cs apply). Additional repayments up to $10,000 per annum. Reverts to the discounted variable rate on expiry of the fixed term.

    Compare
    Details
  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 2 years
    2.56% p.a.

    Flexible loan structure – create up to six loan accounts with different rate and repayment types. Free redraw from your loan using Macquarie Online.

    Compare
    Details
placeholder

Talk to a Mozo home loans expert

Buying your first home, refinancing your existing home or thinking of investing? Speak to Steve, our home loans expert today!

Get Started

What does building insurance cover? 

Building insurance exists to protect you against things beyond your control like fire, flood or a natural disaster.

There are two types of cover to choose from:

  • total replacement cover which includes all the costs to rebuild your home and restore it to the state it was in before that hail storm smashed every tile on your roof
  • sum insured which will cover damage up to a fixed amount.

How much should I insure my home for? 

You've got to remember the price you paid for your home and the cost to rebuild it are not the same thing. The main value of a home is in the land, whereas your building insurance will cover the cost for the raw materials and labour required to completely rebuild a house in the event of total disaster.

There are two methods insurers will use to estimate how much cover you need:

  • Cost per square metre - this method provides a rough guide based on the size of the house and the materials used
  • Elemental estimating - assesses in detail the different elements of the building to calculate rebuilding costs from the ground up, using local wage and material rates and other construction data

Underinsurance is a problem in many parts of Australia. If you are buying in a high-risk bushfire or flood-prone area, it will be important you get an accurate estimate for your building insurance to ensure you are covered in the event of a disaster.

Contents cover 

If you already have contents cover, it might be worthwhile bundling this up with your building insurance cover. Many insurers offer bundling discounts and this might be the most cost effective way for you to insure both your home and your belongings.

Where should I buy home insurance? 

It might be part of your home loan contract to have home insurance but this doesn’t mean you need to purchase this from your lender (even if they offer it to you). You can buy home and contents insurance from any home insurance provider so it is important for you to shop around and get competitive quotes. Compare policies on major features at Mozo’s home insurance hub.

When should I buy home insurance? 

It is recommended that you have building insurance in place when you exchange contracts as this is when you become legally obliged to buy, though this may vary from state to state.

Generally, you organise to get a cover note from your insurer to cover you for the period between exchange and settlement period and on the day of settlement your actual policy will kick in.

In most instances, if insurance is required as part of your mortgage contract, a copy of the cover note will need to be sent to your lender in order for them to release the funds for settlement.

You should also get your contents insurance organised before you start moving your things to your new house, as many contents policies include damage or loss of belongings while in transit.

How much does home insurance cost? 

The cost of your home insurance will depend on a number of factors including the postcode, whether you are in a bushfire or flood-prone area, and how much you choose to insure your home and contents for.

For building insurance, you can choose the sum you want to insure your property for. While you’ll want to pay the least amount for the best cover available, it is important not to underinsure your property just to save a few dollars on your insurance premium. Think about how much the house will cost to rebuild in current market conditions and adjust your sum insured to cover this amount.

There are some ways to lower the insurance premiums on your home and contents. Some insurers have loyalty discounts, so if you have your car insurance with the same insurer they may offer you a discount on your home insurance.

If you have had your contents insured for a number of years without making a claim you might also be entitled to a no claims discount. This can reach a considerable level, so it’s worth enquiring if you would qualify. As long as you can prove continual coverage, you can generally transfer your no claims discount from a former insurer to your new provider.

Don't forget to look for online application discounts which might cut your premium down for the first year. It may also be cheaper to pay your premium on an annual basis rather than monthly.

The final way to reduce the cost of your home insurance premium is to increase the level of excess you are willing to pay upfront if you need to make a claim. The higher your excess level, the lower your insurance premium will be.

Bamboozled by all the home insurance jargon? Read our jargon busting guide.

^See information about the Mozo Experts Choice Home Loans Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.