Home insurance

Key points to remember

You may find that your renewal price has increased, even if there has been no change in your circumstance or the property.

But that doesn't mean your renewal price is the best deal. You should compare prices from different insurers to see how much you could save by switching. You could try different comparison websites, or find quotes through an insurance broker.

Note that insurers can charge a different price through different channels. As an example, one comparison site might be lower than another comparison site. Always try different sites to find the best deal.

Your renewal notice from your insurer should show you the new price for the next year and the date your renewal will start. You will likely receive this around 30-45 days before your current policy ends.

It's best to start shopping around for quotes once you receive your renewal notice. As a general rule of thumb, insurance becomes more expensive the closer you get to the date you need the policy to start.

It's possible to switch providers at any time; not just at renewal. If you're considering switching in the middle of your current policy, there's a couple of things to think about:

    • If you paid an annual amount, you're likely to get a pro-rata refund for the remainder of the policy if you haven't made a claim. If you pay monthly, you'll stop paying your current provider and start paying the new one.
    • There will likely be a cancellation fee. This should be factored into any savings from switching to decide if it is worth making the switch. Generally, the more time on your policy, the better it is to switch.

If it makes sense to switch in the middle of your policy, it's best to speak with your current provider to tell them you are canceling. There may be a notice period; this will determine when your new policy will start. Ensure there is no time when you're uninsured.

If you've got a quote for separate car and home insurance, it's worth checking whether to combine them. A car/home insurance bundle may not be cheaper, but it's worth checking with an insurer what discounts may apply if you have another policy with them.

Note that if you have one policy, a claim for either your car or home may push the price up when you have to renew at the end of the year.

You could think of a monthly payment for insurance as a high-interest loan. As an example, your premium is $1000 and you decide to pay monthly. You could pay $100 a month, which works out at $1,200 for the year; an additional $200 more.

Some insurers offer a discount on your premium if you pay annually, even bi-annually. The added bonus is that you avoid the risk of missing a monthly payment and having your policy canceled, or an NSF fee from your bank.

What is home insurance?

Home insurance can protect your home and personal belongings in the case of damage, loss or theft. It doesn’t provide cover for maintenance costs or major expenses, but may cover things like:

  • Damage or loss to your home
  • Damage, theft or loss of your personal possessions
  • Personal items stolen from your vehicle
  • Damage or injury to others who visit your home or property

There are certain items that home insurance won’t cover though. This can be different from policy to policy so always check coverage carefully. Generally, the following points are not part of standard policies:

  • Unexpected events such as earthquakes and floods are usually not covered. You may need to buy additional coverage for these types of events.
  • If your home is vacant or considered vacant i.e. not occupied for 30 days or more. If damage occurs, you may not be covered.
  • If the house has been poorly maintained. As an example, if damage to the foundations or even a leaky pipe has been ignored, a claim may likely be denied.
  • Valuable possessions. Home insurance will usually provide cover up to a certain amount; usually less than $10,000. Any item over this value will likely require additional coverage to be purchased.

Determine how much coverage you need

Your home insurance cover (and premium) will depend on 3 things. The condition of your home; its location; and your possessions.

Insurance providers will consider the following points:

  • The type of house you live in. For example, a single family home or condo
  • Specifics of your house. For example, it’s age, size, location, the materials it’s made of
  • The amount of crime in your neighborhood
  • How far your house is from a fire hydrant or a fire station
  • Your claims history
  • Your deductible amount

Your possessions or the contents of your home are also a factor. It’s important to understand the value of your belongings; you may undervalue how much your items are actually worth. To do so, you should understand how much it would cost to replace each item if lost or destroyed today. Add up the total to then determine the value of your belongings.

Receiving a settlement for your claim

If you make a claim, the amount you receive from your insurance provider will depend on two things. Firstly, the deductible that you are responsible for paying. Secondly, whether you receive actual cash value or replacement value.

Actual cash value would be the cost of the item as if it were new, minus depreciation. That is to say, the loss of value due to age and condition of the item. So this will depend on the item that is insured and what the insurance company determines that loss of value to be.

As an example, fire damages your laptop. Your insurance provider will only cover the cost of your laptop based on its value at the time of your claim.

Replacement value will give you the actual cost to replace an item. So in the above example, the laptop damaged in a fire was bought 3 years ago for $1000. Your provider will cover the cost of buying a new laptop of similar quality to the one you lost.

Your insurance provider will review your claim and decide how it will settle it.

If you have a mortgage, your policy might have a loss payee clause. This means your mortgage lender would receive the claim amount in case of loss or damage to your house. This amount can go towards the balance of your mortgage should your claim be successful.

At their discretion, your insurance provider may give the settlement to you to repair your house. Or they may give the settlement to your lender. This could be used to redeem against your mortgage, or to provide you the funds for the repairs (you may need to provide proof of the repairs, such as a receipt).

FAQs

Home insurance is not required by law. But some mortgage lenders may require you to have it as a condition of providing a mortgage to you.

Fireplaces and firepits are a welcome addition to your house, but it can increase your premium. There is the obvious risk of property damage, but also that they may increase the value of your house.

This will depend on your provider. But you may incur a charge or fee for changing the policy. The fee may vary depending on what the change is too.

Most insurance providers restrict the number of days you can leave your house empty for. If you are away for at most 30 days, you may still be covered. Any longer increases the risk of theft or damages and you may not be covered at all.

During the winter, some insurance providers may even reduce the number of days your house can be empty for. There may be stipulations that the heating is kept at a minimum temperature. Failure to abide by these conditions could mean any claims made during that time being declined.

Stipulations for empty properties will be documented in your provider's terms and conditions. If unsure, give them a call to find out the exact coverage you will have.

It would be best to speak with your existing insurance provider who may change or upgrade your existing policy to a landlord policy.

If you don't let your insurance provider know that the property is being rented out, any claims you make on the property may be invalid. That's because there are tenants in the property. Note you may even need to let your mortgage lender know too.

The premium is likely to be higher due to the greater risk of damage through your tenants. It would be better to find a specialist landlord insurance policy that includes items such as basic contents and property cover.

Your credit score can impact the cost of your policy. A poor credit score may indicate to an insurer that payments may be missed or the policy may be canceled. So a higher premium will need to be paid. The better your credit score, the cheaper your home insurance policy could be.

Essential information

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