Underinsurance is unfortunately common in Australia, making it difficult for those Australians who are underinsured to resume their standard of living – whether it’s rebuilding their home or replacing belongings to the same standard – if their property is badly damaged or destroyed.
Simply put, underinsurance is when you don’t have enough insurance to cover the replacement value of the items you’re insuring. For most people who find themselves underinsured it’s usually because they haven’t properly calculated the current replacement value of their property and belongings.
One of the best ways to prevent underinsurance is to accurately track and calculate the cost of your assets.
Some common causes for underinsurance
Not accounting for upgrades to your home and belongings – it’s been a time of change for many, with Australians investing in renovations, new furniture, and upgraded appliances. It’s very common to forget to update your insurance following upgrades to home or contents, but this can bite you if you need to make a claim.
Increased building costs – this may be caused by the need to meet updated building codes, building on difficult sites, or rising labour and materials costs.
Supplementary costs – this may include the cost of demolition, clean-up, asbestos removal, council applications, architect, and surveyor services, and even the cost of temporary accommodation during a rebuild.
Not accounting for all your assets – you probably own a lot more than you realise. What about the contents of your garden shed like the lawnmower and your tools? And what about your wardrobe? Six pairs of sensible shoes, three pairs of stilettos, and your expensive running shoes. Would your insurance cover all of this if you had to replace it all?
The key is tracking and calculating
The key to being covered and having enough insurance to repair, rebuild or replace is accurately calculating the value of your property and belongings. Give it a try – you’re likely to be surprised.