Home, Mortgage, Landlords and Renters Insurance explained

by Chris Lang on January 20, 2009

Home insurance signThere are several kinds of home insurance and I thought to give you a quick run-through to compare and explain them once and for all. It is not uncommon for people to get lost amongst these different forms of insurance, so here they are, demystified.

The most popular forms of home-related insurance are

  • Home/Contents Insurance
  • Mortgage Insurance
  • Landlords insurance
  • Renters insurance

The difference between those is mainly the reason why would you get such insurance.

Home insurance can mean two kinds of insurance – a building insurance and a contents insurance. Building insurance is there to cover your house (as in the structure itself, the walls and the roof) in case it is damaged by fire, storm, faults, explosions or a third party. Contents insurance is there to cover your belongings and items contained within the house, such as furniture, appliances, jewelry, etc.

Almost always if you’ve bought a house with a mortgage, your lender will require a building insurance – not to be confused with a mortgage insurance, explained below.

Mortgage insurance (also known as mortgage payment protection) covers you in case you miss mortgage payments. The reasons why anyone would consider it are a possible unemployment, an injury or a sickness and the following loss of income. If you can’t make your payments for over a month, then the insurance company will start making them on your behalf.

In many cases lenders have a requirement of mortgage insurance, when the loan on property is for more than 80% of its value. As a rule, the greater the percentage of the property value you borrow and the more money you borrow, the higher the mortgage insurance premium will be. The premium is usually a one-off amount payable at settlement.

Landlords insurance is for people who own and rent out a property. It is there to cover damage to the property, people that got injured on that property (fall in the bathroom for example), tenants that stop paying rent and the like.

A thing to remember – landlords insurance may not cover accidental damage to the property (such as tenant having a kitchen accident and burning the benchtop), check with your insurance company. The accidental damage clause is important for both the tenant and the landlord, because in case accidents are not covered, the tenant is liable for all the damage, and if he/she disputes it then it becomes the landlord’s problem (here is another discussion of this issue). The rental real estate market in UK is no different from Australia in that respect. In the UK a landlord insurance cover is a must.

Renters insurance is very similar to contents insurance, it is there to cover your belongings as a renter in case of accidental damage from events like fire or burglary. The building is insured by the landlord but your contents are your responsibility and depending on the cost of the items you have such insurance might be a good idea. Some companies will even cover 2 properties on the day that you move, so if anything gets stolen it will be replaced or paid for by the insurance.

{ 4 comments… read them below or add one }

Chris January 31, 2009 at 10:17 am

This post has made it to Consumer focused real estate carnival, look under “Recommended”. Don’t miss the other articles while you’re there!

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Edmonton Movers April 8, 2010 at 3:52 am

Great article. I just bought renter’s insurance recently and had to learn all this stuff the hard way. Would have been easier if I had seen this article first.

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Eve Burke October 15, 2011 at 2:15 pm

Hi, we are moving to Australia in a few weeks. We plan to stay at a relative for a couple of months and then get our own place. I didn’t know that there’s a mortgage and renter’s insurance in Australia. You’ve got very useful information here. Thanks!

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Eve Burke October 18, 2011 at 7:20 am

Great that you even explained the two types of home insurance. Contents insurance should also be equally treated as to building insurance.

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