Are you underinsured?
Underinsurance continues to be a real issue in Australia despite regular natural disasters highlighting how important is to be insured for the right amount.
Underinsurance happens when you’ve taken out insurance, but not enough to cover your costs when things go wrong.
For example, if the total amount insured for your home or contents is less than what it would cost to rebuild the home building and replace your possessions, then you’d be underinsured.
Underinsurance can significantly affect your ability to recover after a disaster. It happens for a number of reasons, including:
Undervaluing how much it would cost to replace your home or contents.
Underestimating the actual costs of rebuilding - including the increased costs of resources and labour - as well as demolishing, and/or removing debris from your block. .
Automatically renewing your policy without reviewing whether your situation has changed during the past year. such as:
Completing renovations without including the value of improvements in your sum insured.
Purchasing large items, such as furniture, whitegoods or electronics without revising the level of contents cover in your policy..
So what can you do?
If you're renting, consider having a contents only policy that would allow you to replace your possessions if they are damaged, destroyed or stolen.
If you own your own home, make sure the sum insured allows you to totally replace the building and contents, or alternatively take out a policy on a 'total replacement' basis.
If you have an investment property, remember that landlord insurance offers more comprehensive benefits, such as loss of rental income, when compared with standard home building insurance.
Keep in mind that insurance is not 'set and forget'. Speak with an insurance specialist or use an online calculator to estimate how much you'll actually need to replace your homes and possessions, and update the sums insured in your policies regularly to reflect current costs and prices..
Compare insurance providers but don't simply chase the cheapest policy - know what you're covered for, don't assume that things like the cost of alternative accommodation is included, and ask if you don't understand. There's no such thing as a silly question, especially when it comes to insurance.
