Preparing financially
Insurance you need as a homeowner
When building insurance actually needs to start, how building, contents, mortgage protection and LMI differ, and what to compare beyond the premium.
- Building insurance risk can pass to the buyer before settlement — the exact point depends on the state and the contract, not a single national rule.
- Building, contents, mortgage protection insurance and LMI are four different products — LMI protects the lender, not you.
- Compare insured events, exclusions, excesses and limits, not just the premium.
- Insure for the rebuild cost, not the purchase price or market value — land value doesn't need rebuilding.
- An owners corporation's building policy doesn't automatically cover your contents or certain lot-owner fixtures — confirm what it actually includes.
When should building insurance actually start?
Not simply "from settlement" — that's not a safe rule everywhere. Responsibility for damage to the property can pass to the buyer well before settlement, depending on the state, the contract and any special conditions. In Queensland, for example, risk generally passes to the buyer from 5pm on the next business day after the contract date under the standard contract — meaning a buyer can be at risk for weeks before settlement without their own cover in place. In Victoria, buyers are commonly advised to arrange cover from the seller's signing date rather than settlement — see the settlement insurance guide for that detail. Confirm the actual risk-transfer point for your specific contract with your conveyancer as soon as you sign, and arrange cover from that date, not the week of settlement.
Building, contents, mortgage protection and LMI aren't the same thing
| Type | What it covers |
|---|---|
| Building insurance | The structure itself — walls, roof, fixed fittings — against damage. For a house or townhouse you typically arrange this yourself; an apartment or unit is usually insured through the owners corporation's policy. |
| Contents insurance | Your possessions, separate and optional — not the building. |
| Mortgage protection insurance | Specific loan repayments if a defined event occurs (illness, injury, death or involuntary unemployment, depending on the product) — narrower than broad income protection. See preparing for income interruption. |
| Lenders Mortgage Insurance (LMI) | Protects the lender, not you, if you default with a smaller deposit — a completely different product from mortgage protection insurance despite the similar name. See deposit, LVR and LMI. |
What should you compare beyond the premium?
A cheaper premium can mean a materially weaker policy. Compare: what events are actually insured, what's excluded (flood and certain other natural perils are often separate or excluded), the excess for a likely claim, any sub-limits on specific items, and — most importantly — whether the sum insured reflects the property's actual rebuild cost, not its purchase price or market value. Land value doesn't need rebuilding, so insuring for the purchase price can materially under- or over-insure the building.
Does the owners corporation policy cover everything?
Not automatically. Strata or owners corporation building insurance typically covers the building structure and common property, but doesn't necessarily extend to your contents or certain lot-owner improvements and fixtures. Confirm exactly what the scheme's policy covers — and what it doesn't — rather than assuming you're fully covered because a policy exists.
Practical checklist
Before and at settlement
- Confirm the actual risk-transfer date for your specific contract with your conveyancer
- Arrange building insurance from that date, not the week of settlement
- Confirm exactly what an owners corporation's building policy covers, for apartments
- Get a building insurance quote based on rebuild cost, not purchase price
- Get a contents insurance quote based on actual replacement value
Questions for a professional
- From what date does risk actually pass to me under this contract?
- What rebuild cost should I insure this property for?
- What does the owners corporation's building policy actually cover, and what doesn't it?