Home Owners and Investors: How much insurance do you really need?

Date: 09/02/2011

The recent string of freak storms, cyclones, bushfires and floods to hit Queensland and other states of Australia has highlighted how important it is to have insurance on your home or investment property, especially for mortgage owners. So how much insurance do you really need?

There are several types of insurance available, and the most suitable policy for you will depend on the type of dwelling you own, its purpose (home or investment) and its location.

Building and contents insurance

Vital for:

Owner-occupiers
Property investors

This is the policy you'll need to cover the actual bricks and mortar of your property (building), along with its chattels, such as carpets, tiles and curtains (contents).

It's quite common for homeowners to get a combined building and contents policy, although it is possible to get separate policies that just cover the building's structure or the contents.

Policies vary widely in price and scope, so make sure you carefully read the terms and conditions of your building and contents insurance product.

"Some policies might appear to offer good value for money, but after factoring in excesses and other expenses, it might cost you more in the long run if you have to make a claim," says Terri Scheer Insurance Manager, Carolyn Majda.

Landlords insurance

Vital for:

Property investors only

If you own an investment property, you'll need to look at buying a specific landlords insurance policy in addition to your building and contents insurance.

"A standard building and contents policy won't usually cover landlords for the specific risks associated with owning rental property," Majda says.

This includes malicious damage by tenants, many types of accidental damage, legal liability for occurrences on the property that cause death or bodily injury and loss of rental income as a result of damage to a property or a tenant absconding.

"Landlord insurance is designed to protect investors against these specific risks," Majda adds.

"Uninsured landlords really need to think about how they would manage financially if they were faced with thousands of dollars worth of damage to their rental property, or were unable to re-let their property while repairs were being made."

Strata insurance

Vital for:

Apartment owner, investor or owner occupied

Apartment owners - both investors and owner-occupiers - will find that they need a strata insurance policy as well, but in most cases, this is handled on your behalf by the body corporate manager.

Often, strata insurance is bundled in with building insurance across the entire apartment complex. Strata insurance is held by the body corporate and paid for by your quarterly owners' levies.

"Under a strata title, the body corporate is legally responsible for insuring the buildings at the strata-title site, as well as the owner's legal liability for common property areas," Majda says.

"This includes insuring the roofing, external walls and the owners' legal liability for shared walkways and garden areas."

As an apartment owner, however, it's important that you organise your own contents insurance and landlords insurance policies.

"If a tenant or visitor injures themselves in a common area of the premises such as a shared walkway, any subsequent legal liability claim should be handled by the strata insurance," Majda says.

"But if a tenant or visitor injures themselves while they are inside a rented apartment, it is the landlord who can be found liable."