Insurance When Buying a House in Australia: What You Need and When

Insurance is one of the most overlooked aspects of buying property in Australia. Many buyers assume they only need to think about insurance after settlement — but in most states, the risk of loss or damage to the property transfers to the buyer at exchange of contracts, not at settlement. If a fire, storm, or flood damages the property between exchange and settlement, you could be left paying full price for a damaged home with no cover in place.

This guide explains when your insurance responsibility starts, the types of insurance you need, what each policy covers, and the special considerations for strata properties, flood zones, and investment properties.

When Does Insurance Responsibility Start?

In most Australian states, the risk of damage to the property passes to the buyer at exchange of contracts, not at settlement. This means you should have building insurance in place from the moment contracts are exchanged.

• NSW: Risk passes to the buyer at exchange under the Conveyancing Act 1919. You need building insurance from exchange day.
• VIC: The vendor bears the risk until settlement unless the contract states otherwise. However, most standard contracts (Section 32) shift the risk to the buyer at settlement. Check your contract carefully.
• QLD: Risk passes at 5:00 PM on the first business day after the contract becomes unconditional. Insure from that point.
• WA, SA, TAS, ACT, NT: The timing varies — your conveyancer will advise you based on the specific contract terms. As a general rule, arrange insurance from exchange to be safe.

Your lender will also require evidence of building insurance before they release loan funds at settlement. If you do not have a policy in place, settlement can be delayed.

Types of Insurance You Need

1. Building Insurance

Building insurance covers the physical structure of the property — walls, roof, floors, fixtures, fittings, and permanent improvements such as built-in wardrobes, kitchens, and bathrooms. It protects against events including:

• Fire and explosion
• Storm, hail, and lightning damage
• Flood (if included in the policy — check carefully)
• Theft and malicious damage
• Impact damage (e.g., a tree falling on the roof)
• Water damage from burst pipes

The sum insured should reflect the full replacement cost of the building — not the market value or purchase price. Replacement cost is what it would cost to demolish and rebuild the property from scratch, including demolition, site clearance, architect fees, and council approvals. For a standard house, this is typically $1,500 to $3,000 per square metre of floor area.

2. Contents Insurance

Contents insurance covers your personal belongings inside the property — furniture, appliances, electronics, clothing, and other valuables. While not required by your lender, it is strongly recommended. A contents claim after a fire or break-in can easily reach $50,000 to $100,000 for a typical household.

Most insurers offer combined building and contents policies at a discount compared to purchasing them separately.

3. Landlord Insurance (for Investment Properties)

If you are purchasing an investment property, standard building insurance is not enough. Landlord insurance provides additional cover for risks specific to renting, including:

• Tenant damage (malicious or accidental)
• Loss of rental income if the property becomes uninhabitable
• Theft by tenants
• Legal liability for injuries to tenants or visitors
• Legal costs for tenant disputes

Landlord insurance typically costs $300 to $600 more per year than a standard building policy, but the additional protection is well worth it. A single tenant damage claim can easily exceed $10,000.

Flood, Storm, and Bushfire Considerations

Insurance premiums vary dramatically depending on the property's location and exposure to natural hazards:

• Flood zones: Properties in flood-prone areas can face annual premiums of $5,000 to $15,000 or more. Some insurers will not cover flood at all in high-risk zones. Always check whether flood cover is included or excluded in the policy.
• Bushfire areas: Properties with a Bushfire Attack Level (BAL) rating may face higher premiums or specific construction requirements. BAL ratings range from BAL-LOW (no special requirements) to BAL-FZ (Flame Zone — the highest risk level).
• Storm and cyclone regions: Properties in northern Queensland and the Northern Territory often attract higher premiums due to cyclone risk.

Before buying, research the property's natural hazard exposure. Your council, state emergency services, and insurance comparison websites can help you understand the risk profile and likely premium costs.

Strata Insurance vs Individual Insurance

If you are buying a strata-titled property (unit, apartment, or townhouse), the building insurance is typically arranged and paid for by the owners corporation through the strata levies. This covers the building structure, common property, and shared facilities.

However, strata building insurance does not cover:

• Your personal contents
• Fixtures and improvements you have made inside your lot
• Temporary accommodation if your unit becomes uninhabitable
• Legal liability for events within your lot

You will still need your own contents insurance and should consider a strata lot owner's policy that covers your fixtures, improvements, and any gap between the strata insurance cover and the actual replacement cost of your lot's internal finishes.

Title Insurance

Title insurance is a one-off policy that protects you against defects in the property's title that were not identified during the conveyancing searches. It covers risks such as:

• Fraud or forgery affecting the title
• Encroachments by neighbouring properties
• Undisclosed easements or restrictions
• Errors in council or government records
• Unpaid rates or taxes that become your liability
• Illegal building works by previous owners

Title insurance is relatively inexpensive — typically $300 to $700 for a one-off premium that covers you for as long as you own the property. It is not compulsory, but your conveyancer may recommend it, particularly for older properties or properties with complex title histories.

Income Protection Insurance

While not directly related to the property itself, income protection insurance is worth considering when you take on a mortgage. If you are unable to work due to illness or injury, income protection provides a regular payment (typically 75% of your pre-tax income) to help you meet your mortgage repayments and living expenses. Most policies have a waiting period of 30 to 90 days and can pay benefits for 2 years or until age 65, depending on the policy.

Your mortgage broker or financial adviser can help you assess whether income protection is appropriate for your circumstances.

How Much Does It All Cost?

As a rough guide for a standard residential property:

• Building insurance: $1,000 - $2,500 per year (low-risk areas)
• Contents insurance: $300 - $800 per year
• Combined building and contents: $1,200 - $3,000 per year
• Landlord insurance: $1,500 - $3,500 per year
• Title insurance: $300 - $700 one-off
• Strata lot owner's contents: $200 - $500 per year

These are indicative only. Premiums vary significantly based on location, property type, construction materials, security features, claims history, and excess chosen.

Related Resources

• Property Insurance Guide — Detailed guide to all property insurance types
• Settlement Process Explained — Understand the timeline from exchange to settlement
• Hidden Costs of Buying Property — All the additional costs beyond the purchase price

This guide is for general information only and does not constitute financial or insurance advice. Insurance requirements and risk transfer rules vary by state and contract. Always consult your conveyancer and a licensed insurance broker for advice specific to your purchase.