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.