Don't be caught out by underinsurance if a natural disaster hits.

We hate hearing of people getting bad news about their insurance when they're at their most vulnerable. Unfortunately, this often happens when a natural disaster hits. All too often, victims are caught short due to underinsurance. The way to prevent this is to make sure you have adequate home and contents insurance.

Failure to update home insurance places many households at risk of financial ruin. As storms, fires and floods make headlines worldwide, four out of 10 Australians have less than $350,000 in home and contents insurance cover. The average cost of home replacement is double that amount*.

29% of homeowners don’t have home and contents insurance and 40% of households are underinsured. (‘Underinsurance’ is when you are not adequately covered to repair or replace loss or damage.)

Yet, the vast majority of Australians (80%) believe they are adequately insured. Thus, many will be in for a rude shock if they need to claim. They are likely to find that the amount they are insured for is not enough to replace their home.Or, that the act that caused the damage is not covered under their policy.   During 40 years in the insurance industry, I have seen and heard too many tragic stories as a result of underinsurance.

You have one big thing to consider every year when your insurance comes due for renewal: Can you rebuild your home – and replace your valuables – if the worst happens? That is, is the sum you are insured for enough? If not, you are underinsured.

So, how do you work out what's enough? You need to factor in:

  • Demolition costs
  • Removal of debris costs
  • Increased cost of building materials
  • Architects surveyors and legal fees
Consider also:
  • Has your council imposed certain building materials that must be used to replace your home? This could mean extra costs.
  • Do you have Asbestos in your home? This may substantially increase the cost of removal.
  • Do you need to install water tanks or solar panels?
  • Are you covered for emergency and temporary accommodation?
  • Do you have up-to-date valuations for your personal belongings and valuables?

If you renew without due diligence, there is a good chance you will be underinsured.

Act first, rather than pay first!

When you receive your next renewal notice, before you pay, review your current home insurance cover. Make sure that your ‘Sums Insured’ are adequate and do not rely on your insurer to set the sum.   You should also review the cover provided. E.g. Are you covered for Listed Events only or do you have cover for Accidental Damage? (Some policies only offer limited Accidental Damage for things like glass rather than Full Accidental Damage cover.)

Find out what cover you need

IAS have access to an advanced Desktop Valuation System. Through this we can provide you with a Sum Insured costing guide for your building and an insurance quote if needed**. When it’s time to renew your policy, we can review your current policies and sums insured and make sure they are adequate to meet your vital needs.

We can help you make sure your home and contents insurance is up to date. Talk to us anytime. Call us on (02) 8268 2900 for an obligation-free chat.

*Source: Canstar research **Typical building replacement costs are provided by Cordell Information Pty Ltd (A.B.N. 95 159 137 274)(‘Cordell’). Whilst every care is taken to ensure the accuracy of the information as a guide for costing, no responsibility is accepted by Cordell for its accuracy. Please check with an Architect, Builder, Quantity Surveyor, Valuer or other suitably qualified professional for an accurate estimate. IAS takes no responsibility for the costs provided by Cordell nor any liability for the accuracy of or reliance upon or use of, the costs.