Are you adequately insured?
Often, it’s not until making a claim that people discover their home and contents are underinsured. Here are some tips and tricks to reduce the risk of being out of pocket if the worst happens.
Words: Andrew Rasch
Unfortunately, many Aussies renew their insurance policies each year without thinking much about the true value of their home and contents. An Insurance Council of Australia survey revealed that 83 per cent of households believe they could be underinsured, which can lead to additional heartbreak when they make a claim.
What’s underinsurance?
Underinsurance is when you don’t have enough insurance to cover the total cost of repairing or replacing your home and contents if they’re damaged or destroyed. For example, if your home is devastated by fire or flood and costs $450,000 to rebuild, and you’ve only insured it for $300,000, then you’re underinsured by $150,000. The same principle applies to contents, so if they’re underinsured you may need to make up the difference in value.
Things to consider to avoid being underinsured
When did you last check your insurance policy? Find your latest insurance document, then see how much home and contents coverage you have and consider whether that reflects their true value.
If you’re insuring your home (excluding land value) to its current replacement value, you may want to consider the style and era of your home, its size and layout, and any outdoor areas such as sheds and pergolas. You may also want to think about the value of extensions, solar panels, permanent fixtures, demolition and clean-up costs, along with factors such as the significant rise in building costs in recent years.
These amounts all vary according to your property’s location, slope and access. For peace of mind, you may wish to have your house professionally valued. It may give you a benchmark you can adjust when necessary.
When assessing your contents, you may wish to consider whether your insurance coverage will be enough if you have to replace all your belongings. Consider going from room to room and compiling an inventory of your possessions. Also consider checking to see if your policy covers items like curtains and blinds, light fixtures and carpets and outside items such as bikes and power tools in the shed. If you’ve upgraded your furniture, electronics, clothes and shoes, consider how much they may cost to replace at today’s prices. If you want to insure your belongings when you take them out and about, consider adding cover for your specified items (portable contents) to your policy.
Insurance calculators
If you’re finding it hard to estimate your home’s value, you can visit buildingcalculator.raa.com.au to use RAA’s insurance calculator.
Consider making it a habit of reviewing your home and contents each time you receive a renewal notice and contacting your insurance company if there are any discrepancies.
IMAGE: Getty.
Want to know more?
RAA Insurance may be able to help. Visit raa.com.au/home-and-contents for more information or speak to one of our insurance experts on 8202 4567.*
*Home and Contents Insurance is issued by RAA Insurance Ltd ABN 14 007 872 602. AFSL No. 232525. Limitations and exclusions apply. Consider the Product Disclosure Statement and Target Market Determination available from the RAA website when deciding whether to purchase this product.
