Before you offer, what will insurance cost?
Price and mortgage repayments are not the whole cost of holding a home. Moneysmart says insurance may be a condition when borrowing for a large purchase such as a home, so insurance availability and cost should be checked before a buyer relies on a purchase budget.
The premium is the recurring cost of the policy. The excess is the amount generally paid when making a claim. Coverage, exclusions, limits and the rebuilding amount determine what protection the policy may actually provide; the cheapest policy may not be suitable for the property or buyer.
Put four insurance figures into the offer budget
1. Premium: obtain a current quote for the property and use the payment frequency that matches the household budget.
2. Excess: record what would be payable when claiming and whether the household could meet that amount without new debt.
3. Covered events and exclusions: check flood, storm, fire and other risks relevant to the location, together with policy limits and special conditions.
4. Rebuilding amount: check whether the sum insured reflects the cost of rebuilding the home, including relevant extra costs, rather than relying on the purchase price alone.
Strata property needs a separate scope check
For an apartment or unit under strata title, the body corporate may insure the building. Confirm what that policy actually covers and whether separate contents or other cover is still needed. Responsibilities and terminology vary by property and jurisdiction.
Before offering, ask the insurer for the policy information and read the Product Disclosure Statement. Confirm legal and policy details with the appropriate professionals. BV Finance can help place the premium and other holding costs back into the purchase budget.
Sources and practical tools
General information only. This is not financial advice. Loan options and eligibility depend on your personal income, liabilities, assets and lender assessment criteria.
Comments