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How to avoid underinsurance

Underinsurance happens when the amount you have insured your home and/or possessions for isn’t enough to cover the cost of replacing them. A person is likely to be underinsured if their insurance cover is for 90% or less than rebuilding or replacing costs. Fortunately, underinsurance can be remedied. If you think you might be underinsured, take a look at these tips to see what you can do.

The Insurance Council of Australia (ICA) says more than 40% of policy holders are under-insured for their home and contents, with a policy that covers only 90% or less of what it would actually cost to replace, repair or rebuild.

This can particularly be a concern if you’ve been in the same place for a while, the cost to rebuild your home changes over a few years. Underinsurance happens when the amount you have insured your home or possessions for isn’t enough to cover the cost of replacing them.

If you think you might be underinsured, take a look at these tips to see what you can do. 

Use a Building Calculator1

If you’re a homeowner, it’s your responsibility to ensure you have enough insurance cover for your home – if something unexpected were to happen you have the help you need to get back on your feet. Especially since rebuilding costs generally go up over time and building codes change.

To help you to receive an estimate on the replacement value of your home, you can use the Building Calculator1 – it’s a prepopulated form using industry data collated by CoreLogic.

Take the guesswork out – get a professional property valuation

The amount it costs to rebuild your property may be significantly different from what its resale value is (that is, what you’d get if you were to sell your place with a real estate agent).

Rather than guessing what the rebuild cost would be, consider obtaining a professional valuation from a licensed builder or professional valuer instead. Not only will they be able to give you an adequate rebuild cost, they’ll also take into account extra costs associated with rebuilding, such as architectural fees and demolition and debris removal costs.

Building regulations change over time – make sure you’ve taken them into account

Building regulations change over time which can add significantly to the rebuilding cost. Likewise, rebuilding costs can also change – often substantially. If you’ve been in your home for a number of years, chances are the cost to rebuild has changed dramatically. Even if you’ve had a professional valuation in the past, if it’s been a while it could be a good idea to get an updated figure (and adjust your cover accordingly).

Factor in the extra costs of rebuilding

As mentioned above, there’s more to the cost of rebuilding than the actual build. Make sure your cover takes into account extra costs such as demolition, debris removal and architectural, engineering and council costs.

Some insurance policies cover fees and debris removal in addition to the sum insured, so check the Product Disclosure Statement (PDS) or call your insurer to see if you need to account for these extra costs in your building sum insured.

Have you renovated or purchased big-ticket items? Check your insurance cover!

If you’ve just put in a new kitchen or bathroom, or maybe a major extension or even a pool, your existing cover may no longer be enough. Check your cover and increase the amount you’re insured for to take into account the latest additions.

Use an online Home Contents Calculator1 to do an up-to-date inventory

How sure are you of the total value of what you own? More to the point, do you even have an accurate picture of everything you do own?

A good way to make sure you’ve included everything you own and work out what it’s worth is to do a room-by-room inventory. To make it easy you can use an online Home Contents Calculator1 to work out how much cover you could need.

List expensive items separately on your policy

Contents Insurance policies often offer different levels of cover. Generally speaking, the lower the level of cover, the lower the limit for any individual item that can be claimed. If you have high value items (such as artwork or jewellery) consider choosing a higher level of cover, or list these items separately.

Check your insurance cover regularly

Most Home and Contents Insurance policies will renew annually – that means your insurer will send you an updated policy every 12 months. By paying the premium indicated on the renewal, you agree to renew the policy. Generally the amount covered will be put up by the insurer each year (often based on the rate of inflation).

Upon receiving your renewal, take it as an opportunity to make sure you’ve got the right level of cover, are adequately insured and adjust accordingly.

Always read the Product Disclosure Statement (PDS) before making a decision

There’s more to insurance than the amount you’re insured for. Your go-to guide is always the PDS – it’ll let you know exactly what is (and what isn’t) covered and under what circumstances a claim will be paid out. It’s vital you read the PDS so you know exactly what you’re covered for.



Read more

Annual insurance health check

Making sure you’ve got the right insurance cover isn’t just a one-time proposition. Not only is your life constantly changing, the cost of replacing or rebuilding tends to go up over time as well.

What type of insurance do you need for your home?

Wondering what sort of insurance you need for your place? The insurance that’s right for you will depend on the type of home you have, and whether you own or rent it.


Things you should know

The information contained in this article is general information only and is not specific to any product.

It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs before acting on it.

* Quote and buy online and save 15% off your annual premium for the first year with promotional code COVER. Plus, save 10% when you combine home and contents at the same address under the one policy.

1 The Building and Contents calculators available through our websites are intended as a guide only. For a more accurate rebuilding cost, consider obtaining a professional valuation from a licensed builder or professional valuer. 

Terms, conditions and exclusions apply to any insurance product. Please read the disclosure documents for your selected product or service, including the Terms and Conditions or Product Disclosure Statement, before deciding.

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