Learning the different types of home insurance cover before you buy, rather than when you need to make a claim, could save you a lot of pain and money.
The range of home insurance products, packages and optional add-ons vary widely between insurers. This means you have a good chance of finding an option that meets all your needs. But it also means you need to carefully read through each policy before signing on the dotted line.
For example, there’s now specific fire, flood and storm cover, as well as coverage for things like accidental damage and motor burnout.
Which policy is best for you will depend on factors such as location, home contents, and, of course, budget.
Whatever cover you choose, though, it’s important that you always read the Product Disclosure Statement (PDS) so you’re aware of exactly what is protected, and don’t ever assume certain types of coverage are automatically included in a policy.
This guide looks at some of the different types of cover out there.
What are the different types of home insurance?
In addition to run-of-the-mill home and contents insurance, there is a seemingly ever-growing list of different types of insurance on the market.
Some are included in policies as standard, while others are add-ons. The main types are:
- accidental damage;
- fire damage;
- flood damage;
- motor burnout;
- storm damage.
We take a look at the differences between them all.
1. Accidental damage
Accidental damage cover provides protection in cases of unforeseen, one-off incidents that damage contents on your property.
This protection is an optional extra that can be included in your home and contents policy for an additional premium, but Rod Attrill at comparethemarket.com.au says it’s a good safety net to have.
The definition of accidental damage is generally the same across the industry, but each policy will offer a different level of cover. Which is why Attrill says you should always check the PDS before making a choice.
2. Fire damage
Having protection against loss or damage from fire is a very good idea in certain areas of Australia, and most policies include as standard some level of cover for bushfires and house fires.
Attrill advises ensuring you have correctly estimated the full replacement value of your property – figures should include site clean-up costs in the event of a fire – and have taken an inventory of all your belongings.
Those living in fire-prone areas should also make sure they are adhering to any specific fire safety regulations – and, if not, do so sooner rather than later.
It’s worth noting, too, that there can be an embargo on your home and contents policy should a bushfire hit your area.
3. Flood damage
Inclusions and exclusions for protection from flood damage can vary widely between insurers. Some policies will cover damage of your contents up to set amounts. Others will exclude areas outside your home such as your garden or pool. Again, check your PDS carefully to check exactly what is covered.
It’s also important not to assume some form of flood cover is automatically included in your policy, as it’s often treated as an extra and attracts a premium.
Flood risk plays a major role in premium calculations more broadly, too. In some cases, insurers may not even cover certain areas because of the high risk involved, so you should find out an area’s level of risk from your local council or the Bureau of Meteorology before buying a property.
4. Motor burnout
Motor burnout insurance can cover damage to certain appliances if the burnout is caused by an electric current or power surge and the motor is burnt out.
It protects a long list of commonly used appliances, such as dishwashers, fridges, pool pumps and so on – though Attrill says exclusions in the cover vary between insurers.
It is also typically left out of most home and contents insurance policies. So, again, consult your PDS or speak to your insurer to find out whether you will need to pay extra to get it.
5. Storm damage
Cover for storm damage is a common inclusion in most home and contents policies, however, Attrill says insurance companies employ different definitions.
It’s therefore important to make sure your policy covers damage from hail, heavy rain and winds, especially if you live in a low-lying area. You should also make sure that the sum insured for your home and contents adequately covers the cost of repairs and replacement of valuables.
Also check if your policy covers temporary accommodation while your property is being repaired, says Attrill.
To reduce your risk of not being covered, make sure you keep on top of your property maintenance, too.
How can I choose the best cover?
Comparing products from different insurers is the best way to get the right cover. It’s vital you do your own research to find the insurance company and the policy that suits your particular circumstances and personal situation.
Understanding your own level of risk will help you identify the insurance product that best suits your needs. Which is unfortunately not always the cheapest one.
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