Buying a property is an exciting time.
Whether an investment property or a new home, it’s easy to get caught up in the emotion of finding that perfect property.
It is perhaps true that for many property purchasers, insurance is an afterthought.
However, insurance should be one of the biggest considerations purchasers make when buying property.
From title insurance to home and contents insurance, there are many different insurance products available for property purchasers, however, many only consider taking out a policy after they have agreed to buy the property.
This can lead to a nasty surprise when it comes time to taking out an insurance policy, as those dreamy descriptions soon turn into a nightmare.
BPC Insurance Group Director David Saunders said that getting insurance quotes before you buy a property can be crucial to understanding if an apparent property of your dreams really is the right one for you.
“Property purchases are emotional,” he told tickboxconveyancing.com.au
“The person falls in love with their new home, business premises, vehicle, etc. People often don’t see the downside to a property.
“‘Riverside views’ and ‘Bushland hideaway’ are great examples that sell a property but can be a nightmare to insure.
“Unfortunately insurance is scientific and practical, but it’s better to know what cover is available and what it’s going to cost before you buy than coming in for a nasty shock after you’ve settled.”
The Insurance Holy Trinity
Whilst the common catch-cry in real estate is ‘location, location, location’, that saying runs a bit differently in the insurance industry.
“The rules of insurance would be, ‘Location, Use, Materials’,” he said.
“Each part of Location, Use and Materials has a massive impact on the number of insurers and the conditions imposed on the policy.”
Location dictates the typical exposures that the insurer will face.
This can include:
- weather events (storm / flood)
- economic and historical experience.
“Modern insurers are using very advanced modelling to predict future outcomes,” Mr Saunders said.
“There are several areas, for example, North Queensland, where cover is becoming unaffordable or simply not available.”
The use of the property is vital as it forms the risk matrix for the insurer.
These might include whether the property is:
There are also variances in how the property is used between those three main categories.
“Typically there is not a large difference between a householders or landlords premiums for the same property,” Mr Saunders said.
“However there is a huge jump if you decide to use the property as a boarding house.
“For Commercial Property the likely tenants business has a massive impact on the likely premium.
“For example, if the business is warehousing bricks, it’s going to be much cheaper to insure than if it’s warehousing fireworks.”
The final part of the Holy Trinity for insurers is building materials.
The materials used in the construction and the age of the building plays an equal role in the likely outcome or available insurers to provide terms.
“At the moment, there is a massive issue with external cladding on buildings,” Mr Saunders said.
“If you have a building with a large amount of ‘non-compliant’ cladding the premium will be massively larger – if you can obtain insurance at all – than a similar building without the cladding.
“Asbestos is also becoming a larger issue in obtaining competitive cover.
“Insurers are also increasing requesting details when properties were last rewired or re-plumbed.
“These requests are becoming more common with many inner-city houses passing their centenary.”
Getting the right cover
So, now that you know what’s important to the insurers, how do you go about finding the right cover?
“The internet is a hugely valuable tool with a vast amount of information available on properties,” Mr Saunders aid.
“However, typically, we need the address, building materials, age and use of the property.
“If it is a larger property we undertake site visits to confirm details to try and cover over the details which an insurer may request.
Ideally, when you are purchasing a property, take a minute to objectively identify the risks.
Rivers and Bushland are quick and easy ones you can identify.
Being higher may mean less chance or flood or storm runoff, but more chance of wind damage.
“Look at the neighbours’ properties, and answer the question, ‘would you insure it?’, then take a minute and re-answer the question “would you provide cover to the risk?”
The simplest and most efficient way to ensure you get the right cover at the right price is to engage an experienced insurance broker to look on your behalf.
“An insurance broker is available to provide advice. We seek cover for a wide variety of risks and have a good indication of what the insurers will be seeking,” Mr Saunders said.
“Insurance is a legal contract entered between the insured (customer) and the insurer.
“The contract responds when a set of circumstances occur with the insurer making good or protecting the client. Not all policies are alike. Insurance is one of the most complicated contracts that a person willingly enters with little regard or knowledge of the circumstances in which the policy will respond.
“An insurance broker acts as the intermediary between the customer and insurer. The Broker represents the client’s interests to the insurer and provides advice and solutions to the client.
“An Insurance Broker has access to a wide variety of insurers that can provide competitively priced and quality cover. We provide options with wide policy coverage at an affordable price.
More than just finding the right policy, a broker can also assist when a claim needs to be made.
“In the event of a claim the broker aids in the settlement,” he said.
The broker negotiates with the insurer for the best possible settlement. Insurance policies are complicated legal documents there is often ‘grey’ area in the wording which can be used to either have claims settled or to reach better outcomes for clients.”
This information is not intended to be advice and should not be relied upon as such. We have not taken into consideration your financial position or financial goals by providing this general information. Conditions apply including insurer acceptance. BPC Insurance Group Pty Ltd (ACN 603 913 239, ABN 68 630 756 672) is an Authorised Representative (AR 472691) of PSC Connect Pty Ltd (ABN 23 141 574 914 AFSL 344648)