Buying property? Consider this home insurance checklist before signing

Finding your dream home is no small feat. With a pricey housing market and range of other factors at play, it can be a minor miracle to find a property that ticks all the right boxes. 

However, the cost of financing a home can encompass more than just your home loan. Home insurance grows in importance every year, as bushfires, floods, and coastal erosion have each jeopardised billions worth of property. In fact, at many as 4% of Australian properties will be effectively uninsurable by 2030.

High risk may mean higher premiums, but it also means a high chance of needing a policy in place before disaster strikes. After all, insurance is best understood in terms of value – not price.

So before you sign on the dotted line, here are some home insurance considerations to make about your future home.

“How high are you?” isn’t just a remix of, “Hi, how are you?” Elevation can be one of the major perks of a perfect property. After all, who doesn’t want an iconic view? 

However, with nearly 85% of Australians living on the coast, your hilltop paradise may still be vulnerable if it’s below sea level. Low-lying areas, including along estuaries and rivers, can carry certain vulnerabilities mountain life doesn’t, especially flooding and actions of the sea. 

However, mountain properties aren’t invulnerable to risk, either. Land-slips and rockslides can shift the ground beneath your feet or shower debris from above. 

Therefore, consider the elevation of your potential home and where it might place you when it comes to home insurance. 

Where’s the nearest water source? Luckily most of us are privileged enough to not have to worry about drinking water, but water damage can be a major threat to your future home. Whenever a home insurance provider analyses your risk profile, they’ll check the location of the nearest body of water and what dangers could come of it. And unfortunately, there’s more than one type of water damage.

Properties along Sydney’s harbours or Melbourne’s Yarra may be hot real estate, but rapid climate change has already endangered them quite a bit – and hiked insurance premiums. Coastal erosion will steadily degrade housing safety and prices over the next fifty years in Australia, which is grim news for all those who bought oceanview real estate in the 2021 property boom.

Rising sea levels and worsening storms all contribute to our retreating shorelines, increasing the frequency of landslides, bedrock removal, and other unwanted ‘landscaping’ due to actions of the sea.

Ocean damage to your home isn't always covered by even the most comprehensive home insurance policy, either. While storm surges are usually included in the product disclosure statement (PDS), tsunamis, king tides, and landslides aren’t (earthquakes are another common exclusion). 

This is because these types of events tend to affect numerous policyholders at once and carry the risk of ‘longevity’ (i.e. they occur over long periods of time), so unless your policy is specifically for flood and storm insurance, this kind of coverage is by no means guaranteed. Keep this in mind before investing in your new beach cottage.

"Unfortunately, there's more than one type of water damage."

Good news, though: a lot of home insurance policies do offer flood cover, either as an optional extra or a main feature of their comprehensive policies. If a river overflows and sweeps away your property, so long as you’re not underinsured and have the right policy in place, insurance could make rebuilding and recovering much more doable.

However, the source of the floodwater matters a lot to providers. While swelling rivers and overflowing dams usually fall under the definition of a ‘flood’, rainwater catching in a basin or in your backyard might not count. When reading the PDS, pay attention to what the provider considers to be a flood, and whether that risk applies to you. If you’re unsure of the risks in your area, check with the local council.

Lastly, damp mould is something you may have to keep on top of yourself. Unless it was directly caused by a claim-worthy event, mould is considered to be a maintenance problem, as opposed to a one-off unforeseen incident. So if you’re planning on living in a wet, tropical place (like anywhere not the Outback), be prepared to put in a bit of regular cleaning.

Speaking of which…

What kind of condition is the home in? While there’s nothing wrong with buying a fixer-upper, maintenance can be an overlooked but important consideration for home insurance.

Generally speaking, insurance won’t cover any damage that occurs over a long period of time, since this could’ve been simply avoided by good upkeep. This also applies to pre-existing damage that occurred before the policy came into effect. 

Interior damage from long-standing issues like leaking or rusted pipes, mould, shifting of the foundation, and so forth will usually be excluded from your policy.

RELATED: Does home insurance cover that? 9 things you may not know about your policy

But don’t just check the inside! When sussing out a house for sale, take a tour of the yard. How close are the trees to the house? Are they old and overgrown, or young and trim? Do the roots go under your foundation? How do the gutters look? Will water clog with the leaves, or does it have places to flow away from your home? What about your fences? 

They are all good questions to ask yourself, since you could be taking on a lot of risk with a very pre-loved home. However, if the dream is worth it, consider mitigating the risks so they don't eat too much of your insurance budget. 

While the blue haze of gumtree oils makes our native bushland a serene place to live, many won’t soon forget the orange horizons of the Black Summer bushfires. After all, as any roadside bushfire danger rating sign will tell you, there is no such thing as “no risk” of bushfires in Australia. So as our suburbs crawl further into the wilderness, let’s consider the risks and how to insure them.

Thankfully, much like floods, bushfires usually receive coverage under most comprehensive home insurance policies. There are a few exclusions, though.

Firstly, smoke damage generally won’t be covered. So if your house only received scorch marks or soot damage, your claim might get denied. However, some policies will accept it if the flames only come within a certain proximity of your phone. 

"There is no such thing as 'no risk' of bushfires in Australia."

Secondly, if the house doesn’t comply with federal bushfire safety standards, your provider could assert you’ve taken on unnecessary risk and hold back a payout. Your house doesn’t have to be fireproof, but a few precautions and fire-aware maintenance can go a long way to not only protecting your home, but assisting claims should the worst happen. 

Lastly, don’t wait till it’s too late! Like with floods, bushfire coverage usually won’t kick in until 48-72 hours after you purchase your policy, so make sure you have adequate home insurance cover in place pre-bushfire season. 

State and local governments will have safety information  and risk assessments available online for bushfire prone areas. So before you nab the place you want, check the likelihood of bushfires through mapping tools like the following:

• NSW
  
• Victoria
  
• Queensland
  
• Western Australia
• South Australia
• Northern Territory
  
• Tasmania
  
• ACT

Living amongst the trees can be a peaceful and calming lifestyle, so weigh the risks and take preventative measures. After all, it’s your dream home: it’s worth protecting.

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