Underinsurance is an issue that is running rampant across Australia. Did you know that the Insurance Council of Australia estimates that roughly 83% of Australian households are underinsured when it comes to their home and contents?
As time goes on, building and replacement costs can increase and you might make improvements to your home or upgrade bits and pieces around the house, so it’s important to make sure that you update your home and contents policy to make sure you’ve got enough cover or risk getting caught out.
Understand your insurance cover
The first step to figuring out whether you’ve got enough coverage is to get to know your insurance. What are you covered for and how much protection does your current policy offer?
The Insurance Council of Australia helps us out here again. They estimate 25% of Australians aren’t entirely sure what they’re covered for. If you are one of those 25%, then it’s well worth taking a look at your policy to see what’s included. Start by checking your insurance PDS for full cover details. Your PDS includes everything you need to know about your policy’s key features, benefits, fees, T&Cs and exclusions. If you’re still not clear on what your insurance includes, then get in touch with your provider to chat about it.
Reading the PDS isn’t everyone’s idea of fun, but it’s well worth it when you’re trying to work out if you’ve got enough cover or if you need to make a claim.
Do you have enough cover?
It can be tricky to know where to start when it comes to calculating your home and building cover. Luckily the Insurance Council of Australia has created a couple of handy calculators to help you estimate the cost of replacing your home contents or rebuilding your house. Although these resources only offer an estimate and should not be taken as advice or a recommendation, they’re a great starting point for determining your level of cover.
Think about the risks that your home is exposed to. Is your home covered for extreme weather events like flood or fire? It’s worth checking to see if you live in a high risk area as this could have a huge impact on your insurance premiums and coverage.
The real cost of rebuilding
The price of goods and services constantly change over time and the cost of rebuilding your house is no different. To avoid being caught out without enough coverage it’s a good idea to review your building insurance annually to make sure your policy ticks all the boxes.
Many people mistake the real estate value of their property as the equivalent of rebuilding should a major insurable event strike, but these two values are completely different. If you’re trying to work out the cost of rebuilding it’s worth talking to a builder or a property valuer to get a professional appraisal so you can make sure you’ve got enough coverage in your building insurance. Alternatively, you can use an online calculator like the Youi Sum Insured Calculator to give you a rough estimate of how much it would cost to rebuild.
The cost of rebuilding isn't just limited to construction. There are other fees to consider including demolition, drafting and planning approval costs to name a few. These add up quickly, especially if they’re not included in your home insurance. Some insurers, like Youi, add an allowance for these costs on top of the sum insured, whereas others account for them as an allowance within the sum insured. Have a read of your PDS to figure out where your policy stands on these outlays.
It’s also worth checking to see if your building insurance covers supplementary costs if you need to move out for a period of time after an insured event. Temporary accommodation inclusions can be a huge help if you need to relocate while your house is being rebuilt.
Building insurance doesn’t always cover business activities or assets, so if you conduct business from home, it could be worth taking out a separate business insurance policy to make sure you’re covered in the event you need to make a claim.
While building insurance isn’t the most exciting expense to fork out for, it’s well worth protecting yourself and your family from a loss that you might not be able to financially recover from. So if you’re going to take out a policy, make sure you do your homework and find the one that suits your needs best.
The cost of replacing your belongings
Have you ever thought about how much it would cost to replace all of your belongings in one hit? Contents insurance can go some of the way to covering the cost of replacing your things, but you need to properly value your assets to make sure you’re covered.
Taking inventory of all your belongings can be pretty overwhelming, so tackle it one room at a time and use a checklist like the Insurance Council of Australia’s Household inventory checklist to make sure you’ve got everything ticked off. Alternatively, a contents calculator can help you figure out how much your belongings are worth.
If you do have a few high value items, like jewellery, tools, laptops or antiques then it could be worth listing them separately with a specific value. Some policies can have a limit for how much you can claim on single items, which could leave you out of pocket if you have to cover the difference. If you can, take pictures of any receipts and save them to the cloud so that you’ll always have access which can help to speed up the process in the event of a claim. All insurers and policies are different, so check your PDS to see how much your assets are covered for.
If you run a business from home, you might need to take out a separate business insurance policy. While most insurers include some level of home office equipment cover as part of the sum insured, it’s important to check your PDS for any business exclusions and take out optional extras to cover your business items if need be. When you take out contents insurance with Youi, your home office equipment valued under $15,000 is included in your contents with no separate limit. If your equipment is valued over $15,000, it will need to be specifically listed on the policy at its market value.
As things change around the house, so should your insurance. Regularly check your policy to make sure you’ve got enough coverage and update it when you upgrade your belongings. Minimise the risk of underinsurance by getting to know your insurance policy. Have a read through your insurer's PDS and be sure to update your policy when things change.
If you’re looking to switch or upgrade your existing home and contents insurance? Check out Youi. With a range of options, Youi’s home insurance offerings may have just what you are looking for.
Insurance Council of Australia. (n.d.). Home and contents insurance tips. Understand Insurance.