Owning your first home and insurance

23 August 2017

For many years now, it’s been pretty well drilled into us that home ownership is but a pipe dream unless you have spent a near-lifetime saving. So, if you’re one of the lucky ones who has been able to afford to put down some roots and pay for the ownership of those roots yourself, we bow down to you.

If you are a first home buyer, investigating your insurance options and having some solid protection in place are important things to organise before you take possession of your newly purchased property.

Lenders mortgage insurance, home insurance building cover, home contents insurance and mortgage protection insurance are four key insurances that will help you protect your investment, as well as help stop the feeling of accomplishment that comes from owning your home from turning to a feeling of dread as a result of you now being responsible for covering the cost of anything going wrong. Let’s take a look at each of these insurances in a little more detail.

Home contents insurance

This one is simple, which is something you very rarely hear about insurance. Home contents insurance will protect exactly that — the contents inside your home. Your furniture (that fancy new couch you had customised for your living room seems worth protecting, no?), the state-of-the-art appliances (it seems only fitting that you would get the best washing machine, dryer, dishwasher, microwave or blender that life has to offer), computers, clothes and even, in some cases, furnishings — like rugs, carpet and curtains — are protected by home contents insurance.

Home building cover

While home contents insurance will protect the more mobile items within your home, home building cover will protect the more permanent fixtures and appliances of your home. Things like hot water systems, air conditioning units and stoves, as well as cables, pipes, switches and light fittings are typically covered. In some cases, outdoor items — like gates, fencing and even fixed clotheslines — are also covered.

Home building cover typically springs into action when things are destroyed or damaged as a result of an insured event. An “insured event” where home building cover is concerned usually includes, but is not limited to, fires, storms and cyclones.

In some cases, home building insurance will be a requirement of your mortgage, so you won’t actually have a choice about whether or not to acquire it.

Lenders mortgage insurance

While the two above-mentioned insurances are a little more well-known, lenders mortgage insurance is a little more obscure, but it’s certainly worth knowing about. Basically, lenders mortgage insurance is wonderfully useful for those of us would love to own our own homes, but don’t quite have the deposit that is usually required to kick-start the lending process.

Here’s how it works in a nutshell:

  • While you, the borrower, actually pay the premium for lenders mortgage insurance, it is actually the lender who is protected.
  • Having a lenders mortgage insurance in place protects the lender if you default on the loan and are unable to make your payments.
  • With this added protection, lenders are more inclined to offer prospective homeowners a loan even if they don’t have the desired 20 per cent deposit.
  • In some cases, lenders mortgage insurance will enable prospective homeowners to borrow up to 95 per cent of a home’s purchase price.
  • Lenders mortgage insurance is generally a requirement if you are borrowing more than 80 per cent of a property’s value.
  • In order to qualify for lenders mortgage insurance, you will need to meet a set of criteria specified by the insurer to ensure you will be able to meet your mortgage repayments.


Mortgage protection insurance

Look, we know you’re probably excited about owning your own home, and we don’t want to put a dent in that… but have you thought about how you’d go about ensuring your mortgage continues to be paid if unforeseen circumstances arise?

We don’t want to rain on your parade, but it’s important to consider how you will ensure that your mortgage payments will continue to be met if any of the following occur:

  • You find yourself involuntarily unemployed
  • You are unable to work as a result of an illness or injury
  • You pass away


We know those bullets got more and more depressing as they progressed. But these are important things to think about, particularly if you have dependants who rely on your income to keep the roof over the heads.

Mortgage protection insurance is designed to help provide some peace of mind that if anything were to happen that would limit your ability to earn an income, your mortgage repayments would continue to be met.


Source: KnowRisk


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