The risk of underinsuring your property. Unfortunately its well known that many Victorians don’t have enough insurance cover. When it comes to property ownership, many continue to leave themselves at risk.
Some underinsure because they can’t afford it, other choose to save on the cost while some also feel a distrust toward insurance companies. The risk of underinsuring can leave you in a bad predicament.
Underinsuring can happen by simply not recognising the cost of rectifying the damages or replacement. A fire for instance can cause the entire property to no longer be habitable. Replacing a home is a cost many are not aware of. The cost to demolish and clear the site, to drafting and submitting new build plans are something people overlook. These cost money and time. Where will you live in the event you have no home? How much have you got set aside to look after yourself while waiting for an insurance claim and arranging the paperwork for a new build? Will you have enough money to then build the property?
Another cause of underinsuring is the fact labour and materials to repair or replace the property are much great than they were ten years ago. If the property is a double storey, you’ll also soon discover how much more expensive it is to rebuild another double storey to a single storey.
Underinsuring your property is a big problem at any time
Many people we speak to believe underinsuring is simply not having enough money from an insurance claim to rebuild and fix the property into the same standard as it was before. There are many other costs involved that are often overlooked. The insurance claim on its own takes time. This is something people often neglect to consider. The delayed reaction of a claim can often be caused by storm damage. It can trigger thousands or tens of thousand of claims. These need to be assessed and reviewed before an approved claim takes place. You may require accommodation or other financial assistance during this time. Being underinsured will make matters far worse and for some, this may prevent them from rebuilding or fixing their home. This can be quite a serious problem.
Underinsurance usually happens over time. As it gradually occurs, many don’t realise they are underinsured. Taking out insurance when you purchased the property may have been adequate at the time, but by not regularly reviewing the level of cover since then, may cause a risk of underinsuring.
If you don’t regularly review your insurance needs, the RACV have some helpful insurance calculators. These calculators will offer you good guidance, but we we recommend consulting a general insurance broker. They can identify the appropriate levels of cover, compare providers and present a solution.
Did you know?
According to industry body Insurance Council of Australia (ICA), more than four out of five Australian homeowners and renters have underinsured their home and contents.
According to the RACV the Wye River bushfire saw approx. 65% of RACV members whose homes were destroyed were found to be underinsured. That indicates that two in every three RACV member’s homes were underinsured.
Should I pay extra form being insured?
Owning a property, regardless if its to occupy or invest, will likely be the most expensive asset you and your family own. As property advisers (buyer’s advocates), we don’t see value in saving a few extra hundred dollars to compromise an insurance claim. We are very spoilt for choice when it comes to insurance products, so seeking advice is necessary. Having a little extra insurance cover will bring peace of mind and may very well be the difference between recovering your losses or not.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
April 2021
