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Types of Insurance for Homeowners in Australia

Investing in real estate may cost you a significant amount of your lifelong earnings. The reason people invest in real estate is because of the potentially high returns it offers in the long run. However, an asset of this value needs to be insured, for there are many circumstances which may result in unexpected costs related your investment.

To safeguard your assets against a number of external factors as well as to prevent you from losing your hard earned money invested in property, there are a variety of insurance schemes for homeowners in Australia. Today we explain to you some of the common insurance types available, which can be helpful for you in adverse situations.

Mortgage Protection Insurance

Mortgage Protection insurance, also known as consumer credit insurance or home loan insurance, is an insurance product that can protect the borrower from the risk of default. This insurance is available for for both owner occupied and investment property loans.

A mortgage protection protects the mortgagee against unfortunate events of jobs loss, serious illness etc. due to which a borrow wouldn’t be able to repay the loan amount. By claiming this insurance, the borrower may receive monthly repayment amount or one lump sum amount directly from the insurance company for the time as specified in the policy.

Some of the factors that influence the Mortgage Insurance premiums are:

  1. Single or Joint Policy
  2. Loan Amount
  3. Your Age
  4. Repayment amount

Lender’s Mortgage Insurance

A lender’s mortgage insurance is a policy designed to protect the lenders from any sort of financial loss if the borrower isn’t able to pay his debts. This policy is also beneficial for homeowners as it allows them to apply for a home loan with as low as 5% deposit fee. In case you aren’t able to repay the monthly installments due to any reason whatsoever, the lender can sell your property to get the amount he lent back. If he still isn’t able to recover the full amount than the insurance company will pay the balance.

This policy has been introduced in Australia so people are able to get more home loans approved. The premium of this policy is paid by the borrower to the lender along with his monthly repayment amount.

Building Insurance

This insurance as the name suggests covers and protects permanent structures such as your home, the swimming pool if you have, the garage and any other physical structure present in or around your home, which you own. People often confuse building insurance with home insurance, however building insurance is a subset of home insurance which also contains content insurance as one of its types. Building insurance cover structures while content insurance covers the items present in your home. You can file and claim building insurance to help you in situations where your home has been damaged due to:

  1. Fire
  2. Flood
  3. Tree Falling
  4. Oil Leak etc.

Content Insurance

As mentioned above a content insurance is a subset of home insurance covering and protecting the items such as televisions, paintings and other content or items you own in your home. While applying for this insurance you ought to mention the name of all the items you wish to be covered in this policy and only these items would be paid for by the insurance company should they be stolen or damaged.

These insurance are further divided into two categories, replacement value and new for old. The first type of content insurance will pay you the present worth of the belonging which likely depreciates over time. In second i.e. the new for old content insurance, you will get a new product or its equivalent cost.

Landlord’s Insurance

This insurance as the name suggests is for the protection and benefits of landlords who rent their property to tenants. This type of insurance although is similar in utility to building insurance, however, it has a strong point of differentiation. While building insurance generally covers cases related to damage done by fire, storm etc., a landlord insurance also protects landlords against damage done by their tenants or tenant’s friends. Some companies even offer a rent protection scheme, where the landlord is paid rent for the home should the tenant flee or is unable to pay rent due to any reason whatsoever.

These 5 types of insurance are made specifically for the benefit of house owners so that their property investment doesn’t cause them losses instead of profits as they planned.

The information provided here is general only and does not consider your personal objectives, financial situation or needs. Before you decide to purchase a product, it is important to consult a professional.