Home insurance for an apartment is different – here’s what you need to know

When it comes to protecting your home, having the right insurance is essential.

With 10 million Australians now residing in apartments, it’s crucial they have the right coverage to avoid being underinsured.

Otherwise apartment owners could be up for hefty bills should an unforeseen incident occur.

Apartment owners should familiarise themselves with the differences between building insurance and contents insurance.

Building insurance typically only covers the building structure itself, not personal belongings, or liability as a resident.

Let’s break these different insurance types down.

What are the different types of insurance that apartment owners should be aware of?

Building insurance

Building insurance normally covers an individual domestic property that is not part of a strata or body corporate scheme.

Strata insurance

Strata insurance, sometimes referred to as ‘body corporate insurance’ is a policy designed for residential strata, group and community title properties, body corporates, owners corporations, and strata managers.

It’s often a legal requirement that strata insurance is in place for multi-dwelling properties.

A strata insurance policy generally covers properties within the one building, complex or on the same block of land. These types of policies normally cover the building structure, parking areas, and other common areas within the lot or complex.

It may also include liability coverage in case someone is injured or suffers damage within the common areas of the property.

Individual unit owners are not able to take out insurance for their own unit or apartment if it is in a building or complex.

Contents insurance

Contents insurance, meanwhile, covers an owners’ personal belongings within the apartment, such as furniture, electronics and appliances, and other valuables – basically anything that would be taken with you if you move out.

Depending on the location of the unit, contents could also include carpets, lino and floating wooden floors, air conditioners and fixtures owned by you (as a tenant) which would be removed when vacating.

Which insurance is right?

Importantly, apartment-buyers need to educate themselves on which insurance best suits their needs by seeking the advice of an insurance professional.

“It’s really important to research your policy,” our GIO insurance expert says.

“Buyers need to ask themselves is this policy the right one for your insurance needs?”

Important terms to know as an apartment owner

While it might not be at the top of your list for exciting things to do, knowing some key terms around insurance is important.

Furthermore, being across what you’re insured for could save you thousands of dollars, if not more, down the track.

1. Sum insured

The sum insured refers to the maximum amount of coverage you have chosen to protect your contents.

It pertains to the coverage dollar amount allocated to protect your personal belongings and possessions within your apartment. This includes furniture, electronics, appliances, clothing, jewellery, and any other valuable items you own.

If you have special items or collectables, such as musical instruments, that would be hard to replace if they were lost then it’s worth having these insured separately.

2. Underinsurance

Under insurance is when the sum insured listed on your policy isn’t enough to replace your belongings.

When setting the sum insured for the contents in your apartment or unit, it is crucial to review and update the coverage periodically.

The acquisition of new items over time may require adjusting the sum insured to ensure sufficient coverage.

3. Excess

Excess refers to the portion of a claim that falls under your responsibility as the policyholder, requiring you to contribute financially towards the cost of the claim.

Essentially, it’s the amount you must pay out of pocket.

Suppose you have a contents insurance policy for your contents with a $500 excess, and you file a claim for $5,000 worth of damage to your items.

In this scenario, you would be accountable for paying the $500 excess, while the remaining $4,500, if approved, will be covered by your insurance provider.

4. Exclusions

Every insurance company will have exclusions on your policy. These exclusions will list things that won’t be covered in the event of an incident.

It’s worth understanding what these are and speaking with a professional if you’re at all unsure.

At the end of the day…

“Having insurance provides peace of mind,” our GIO insurance expert says.

“If you’ve got the right coverage, insurance allows homeowners to rebuild, repair or replace where they may otherwise not be able to afford to if a major event occurs.”

Don’t assume you’re automatically covered – take the right steps to protect your belongings with the right insurance policy or policies.

Written by GIO and published on realestate.com.au