Home Insurance Before Settlement — When First Home Buyers Need Cover

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Sort home insurance before exchange — not after.

Most first home buyers leave it until settlement. That's already too late.

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Pick a policy and get covered

Choose what suits you, get the Certificate of Currency, forward it to your lender. Sorted.

Exchange day — not settlement day

From the moment contracts are exchanged, the property is legally your risk. If anything happens before settlement, you're liable. Insure from exchange day.

Your lender requires it

Your bank will not release mortgage funds without proof of building insurance. Not having it delays settlement — or can cause it to fall through entirely.

Premiums vary significantly

The same cover can cost 40% more depending on the insurer. Comparing at least 3 policies before choosing saves hundreds every year.

Home Insurance Explained for First Home Buyers

When Home Insurance Becomes Your Responsibility

You need building insurance before settlement — but the exact moment you become legally responsible for damage to the property varies by state. The table in the next section breaks down the default rule for each state and territory.

Either way, your mortgage lender will require proof of building insurance before they release loan funds, and they typically want that Certificate of Currency at least 5 business days before settlement.

The practical rule: Get three quotes 4 to 6 weeks before settlement, choose a policy 2 to 4 weeks out, and email the Certificate of Currency to your lender as soon as you have it. Set the policy start date to whichever is earlier — your exchange date (if risk passes to you at exchange under your state's default rule and your specific contract) or your settlement date.

If you are buying off the plan, cover usually starts at practical completion — the developer's insurance covers construction. See our buying off the plan guide for the full practical completion timeline. Your conveyancer will confirm exactly when risk passes to you in your specific contract.

Home Insurance Before Settlement: State-by-State Guide

When you become legally responsible for the property's damage depends on which state or territory you're buying in. The default rule for each is below. Note: contracts can override the default — always check yours with your conveyancer.

Contracts can vary this default. Always check with your conveyancer.

This is general information, not legal or financial advice. Verify your specific contract with your conveyancer.

Home and Contents Insurance Explained

"Home and contents insurance" is an umbrella term for two separate policies that most insurers sell as one combined product. Understanding the split matters because only one of them is mandatory for your mortgage, and the difference in price between combined and contents-only is significant.

Building insurance covers the physical structure — walls, roof, floors, built-in fixtures (kitchen cabinets, bathroom fittings, built-in wardrobes), fences, carports, garages, sheds, and permanent improvements like decks, driveways, and pools. If your home is damaged by fire, storm, flood, theft, vehicle impact, or burst pipes, building insurance pays to repair or rebuild. This is mandatory for mortgage approval — your lender will require it every year while you have a loan.

Contents insurance covers the things you own inside the home — furniture, whitegoods, electronics, clothing, bedding, kitchenware, artwork, tools, and often items you take outside the home (bikes, laptops, handbags). Contents insurance is optional but strongly recommended. Replacing a 3-bedroom home's contents after a total loss averages $60,000 to $100,000.

Combined home and contents is what most first home buyers actually buy. Bundling the two policies typically saves 10% to 15% compared to buying separately and gives you a single claims process if something big happens (a fire affects both the structure and everything inside it).

Exception — apartment buyers: If you are buying an apartment or townhouse in a strata scheme, the body corporate's strata insurance covers the building itself. You only need contents insurance — $400 to $1,200 per year — which is much cheaper. Ask for a copy of the strata insurance certificate as part of your pre-purchase strata report.

How Much Does Home Insurance Cost in Australia?

The average combined home and contents policy costs $1,200 to $2,500 per year for a standard 2-to-4 bedroom house in a low-risk suburb. First home buyers often pay at the lower end because newer homes are cheaper to insure (modern wiring, newer roof, compliant plumbing) and first homes tend to be smaller.

Apartment buyers with contents-only cover typically pay $400 to $1,200 per year, since the strata insurance covers the building.

What drives your premium up or down:

• Location. Flood zones, bushfire-prone areas, and coastal suburbs exposed to cyclones or storm surge can multiply your premium by 2 to 3 times. Check the NSW, QLD, and VIC flood maps before you commit.
• Building type and age. Brick homes are cheaper to insure than timber. Homes built after 2000 are cheaper because they meet newer construction codes. Heritage-listed homes cost more because specialist rebuild tradies are pricier.
• Sum insured. The amount it would cost to rebuild your home from scratch (not the market value) — a higher sum insured means a higher premium. Underinsuring to save money is the biggest mistake first home buyers make.
• Excess. The amount you pay out of pocket per claim. Choosing a $500 excess instead of a $100 excess typically cuts 10% to 20% off the premium.
• Security features. Deadlocks, monitored alarms, smoke detectors, and secure garages all reduce premiums. Some insurers offer 5% to 10% discounts for alarm systems.
• Claims history. A claim in the past 5 years can add 20% to your next premium; a clean record gets no-claim discounts.

The same cover varies up to 40% between insurers — always get at least 3 quotes with the same sum insured and excess before choosing. First home buyer budgets are already tight after stamp duty — budget the full insurance premium alongside the deposit in our stamp duty calculator.

How to Compare Home Insurance Quotes

Comparing insurance on price alone is how first home buyers end up underinsured. The cheapest policy usually has lower sum insured limits, a higher excess, flood excluded, and caps on temporary accommodation. Here is what to actually compare line by line.

• Sum insured (building). Is the quote based on the rebuild cost, not the market value? A $700,000 market-value home might only need $450,000 building cover. Use the insurer's built-in calculator and add 15% buffer for demolition, clean-up, and architect fees.
• Sum insured (contents). Do a room-by-room inventory. Most first home buyers underestimate by 30% to 50%. Include everything — clothes, books, kitchenware, electronics, not just the big items.
• Excess amount. Standard is $250 to $500. A higher excess cuts the premium but means more out-of-pocket per claim.
• Flood cover. Some policies exclude flood entirely, others include it as standard, others charge extra. This is where cheap policies save money — do not let it be where you save money too.
• Storm and water damage. Check for exclusions on "gradual water damage" vs "sudden" events. Leaky pipes are often excluded unless you can prove the leak was sudden.
• Accidental damage. Broken TV, wine on the rug, kid puts a scooter through the wall. Not every policy includes accidental damage as standard — add it if you have kids or pets.
• Temporary accommodation. If your home is uninhabitable after a claim, the policy pays for alternative accommodation while repairs happen. Check the limit — $10,000 is low, $30,000+ is better.
• New-for-old replacement. Damaged items are replaced with new equivalents, not depreciated value. This is standard in most policies but worth confirming.

Compare the Market lets you see real prices side by side from multiple Australian insurers — covering flood, storm, accidental damage, and temporary accommodation options. Use the partnership block above to start your comparison.

Building Insurance vs Contents Insurance — Do You Need Both?

Building insurance is required by your lender. Every mortgage lender in Australia requires proof of building insurance before releasing loan funds at settlement — and again each year when you renew. Without it, your loan is technically in default. This is non-negotiable if you have a mortgage, even a tiny one.

Contents insurance is your choice. No one will require it, but almost everyone needs it. Replacing a 3-bedroom home's contents after a total loss (fire, flood, theft) averages $60,000 to $100,000. Contents cover is cheap relative to the protection — typically $300 to $600 per year if bought with building cover, vs $500 to $1,000 standalone.

If you rented before buying and already had contents insurance: Do not cancel it. Call your insurer, ask them to switch the policy to home and contents at the new address from exchange date (or settlement if risk passes later), and confirm the sum insured matches your updated inventory. This is typically cheaper than cancelling and re-quoting, and you keep your no-claim discount.

If you are buying an apartment: You only need contents insurance. The body corporate's strata insurance covers the building and common areas. Ask your conveyancer for a copy of the strata insurance certificate and confirm it has at least $10 million public liability and replacement cost cover.

Still finalising your loan? Talk to a broker about any lender-preferred insurers — some lenders offer small discounts or cashback for using their preferred insurance partner, though the premium is usually higher than what you would get by comparing three quotes independently.