Is your home at risk of underinsurance?
Underinsurance occurs when you have insurance, but it’s not quite right or enough cover for your personal circumstances, or you don’t have insurance at all. The Insurance Council of Australia (ICA) estimates that 23 percent of Australian households do not have building or contents insurance, meaning that approximately 1.8 million residential households are not protected. While some may underinsure their property on purpose, usually in the belief that ‘it’ll never happen to me’, for many others the shortfall is unintentional.
Other factors that lead to underinsurance include failing to take into account increased building costs and not adjusting Sum Insured value following major renovations. Sometimes underinsurance results from people choosing a lower Sum Insured value to reduce their insurance premium.
More Australians have inadequate protection, with the Australian Securities and Investments Commission stating that up to 80 percent of homeowners are underinsured. If the total amount you have insured your home for is less than what it would cost to rebuild then you are underinsured. In case your home is damaged or destroyed due to an event, you might not have enough financial capacity to pay for any costs not covered by your home building insurance policy. The large-scale losses experienced after the 2020 bushfires and 2021 QLD & NSW floods serve as a reminder of the importance of insurance in avoiding financial losses.
Further data from Insurance Council of Australia (ICA) shows despite having policies in place four out of five Australian property owners and tenants are underinsured. ADF members and veterans who are renting due to posting and other circumstances should check to ensure they have adequate cover for their contents.
Here’s how to fix it – Top tips
- Tip 1: Know what the full replacement cost is of your home and check you have included everything with a high replacement cost such as household fittings, carpet and curtains. Use DSH Insurance’s Building Cost Calculator to estimate out how much it would cost to rebuild your home. The estimate will be a guide only and not a professional valuation.
- Tip 2: Read your Product Disclosure Statement and Key Facts Sheet to understand what your home building insurance covers – does it cover removal of debris, temporary accommodation etc. if your home can’t be lived in.
- Tip 3: Check your insurance renewal document to ensure DSH Insurance has accurate and up to date information about your property.