Double your insurance payments

If your insurance is due for renewal, think twice before you automatically pay that annual fee.  A report produced by the NSW Insurance Monitor revealed some insurers are charging as much as 2.5 times more for home insurance on similar properties in the same suburb.

The report found an average difference of up to $1,100/year for ‘basic’ home and contents policies when comparing quotes for identical properties across 11 NSW suburbs (see graph below).  Professor Alan Fels, who prepared the report, said it is “very concerning there are such big differences in prices quoted for the same property. It suggests that competition is not fully effective in this industry.”

Most consumers miss out on savings by not shopping around

Professor Fels said consumers can save hundreds of dollars by shopping around each time before they renew their home insurance policy, but added that “evidence shows most don’t, and miss out on savings.  Often cheaper prices are only available to new customers, and consumers shouldn’t assume a cheaper price this year will be the same next year,” Fels said.

Professor Fels also criticised Australian insurers for “ignoring calls to list last year’s policy cost in their renewal insurance notices”.  This is a measure that has been adopted in the UK, where from April 2017, it will be mandatory for general insurers to provide the previous year’s premium on their renewal letters.  “Insurers don’t make it easy for consumers to compare previous years’ insurance costs,” Fels said.

Use an insurance broker

One way around the issue of over payment is to use an insurance broker, in a similar way that we utilize the services of a mortgage broker.  A good insurance broker will have the knowledge and ability to obtain the best price for you without losing returns.

The reason for having insurance is to protect your investment property. This is an obvious choice for most of us as financial institutions/banks won’t wait for mortgage repayments if there’s a problem with your property.

Policies an vary widely, therefore it’s important to seek advice from an insurance broker who can provide the most appropriate level of insurance for your property and help you understand the differences in the policy coverage.

A good broker can provide you with detailed technical expertise including knowledge of insurance markets, prices, terms and conditions, benefits and pitfalls lurking in the wide range of insurance policies on the market.  The broker should also have experience with claims and settlements and will act as an advocate for claim settlements that may arise under your insurance cover.

If your investment property is a house you may need a combined policy which covers both landlord and building insurance coverage.  As an owner of a unit you will most likely only need a cover for landlord insurance, as the building should be covered by your strata plan insurance.  Always check this detail prior to purchasing your property.

Landlord insurance

Landlord insurance generally covers events that cause loss of rental income, damage or theft in your property.  While your rental income may cease overnight, your mortgage repayments will still need to be paid. Some examples for when coverage may be used include tenants leaving without notice; damage caused by your tenants; and when the property becomes uninhabitable due to an unprecedented event such as a fire or burst pipes.

Generally, landlord insurance covers the following :

  • Loss of rent
  • Rent default
  • Contents of landlord
  • Liability
  • Flood
  • Clean up costs associated with illegal drug production

Building insurance

Building insurance protects against damage to your property’s structure.  The cover extends to more than just walls and roof.  It can include your garage, outbuildings, perimeter walls and pools.

It is important to insure your building for the full cost of reconstruction otherwise any claim payment may be reduced.  Be aware that the full cost of reconstruction is the cost of rebuilding your home, not the market value – sometimes referred to as the ’emotional’ value.  You should also always notify your insurance provider when the property is being tenanted.

Building insurance can provide cover for:

  • Fire
  • Lightning strike
  • Storm damage
  • Falling trees
  • Explosion (caused by gas leaks etc.)
  • Earthquake
  • Vandalism
  • Vehicle collisions with the building
  • Water damage

 Example scenario

A tree falls onto a house off the back of a violent storm leaving the property uninhabitable for 9 weeks.

Solutions:

  • A landlord insurance policy would respond by covering the loss of rent during this period.
  • A building insurance policy would respond by covering the cost of repairing the property structure.

It all comes down to risk management.  Use a qualified insurance broker to ensure you’re obtaining the best price for the most appropriate cover, and sleep easier at night knowing you have the protection you need if the worst case scenario comes your way.

If you would like to discuss your insurance requirements, please feel free to call me on 0416 226 233.

Silvan Frei Dip. F S Brok. QPIB, is an experienced insurance broker with the Ausure group.  Contact Silvan by email sfrie@ausure.com.au or visit www.ausure.com.au Authorised Rep. No. 436148 

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