Underinsurance is not a scare-tactic that insurance companies use to rouse clients. It is in fact a real risk which many Aussies face. It’s important to ensure that your home, contents, and other important assets are insured properly so that you are not left out of pocket if something goes wrong. Here’s how to tell if you are one of the many Australians who are underinsured.
Why are Australians underinsured?
Underinsurance means that the insurance cover you have in place for your home and its contents does not adequately cover the costs of what it would take to rebuild or replace the home and contents if it was lost in an insured event.
Underinsurance occurs when home owners fail to review their policies when they are up for renewal, missing important additions to the home or new purchases being added to the policy. It also occurs when the home or the contents is under-valued. And, when home owners do not consider the true costs of rebuilding, including demolition, removal of debris, and other construction factors.
Keeping your premiums low isn’t the only priority you should be focusing on, it’s just as important to secure a good policy which covers you for the risks that you may face. By calculating exactly how much it would cost to replace your home and your contents, you’ll ensure you’re not paying too much by being over-insured for items you don’t have, and you won’t be underinsured and facing a loss if something does go wrong.
How much should you be insured for?
Your insurance policy should cover the true value of your home to rebuild from scratch, as well as the value of all the items inside your home. To figure out this sum you could list out the contents of each room, and calculate what it would cost to replace these. Also, consider the rebuild costs and factors affecting this, such as slope of land and matching the same finishes. A Tool such as the CGU Home & Contents Calculators can help you calculate the replacements costs needed.
For example, if you own a federation-style home, it may be much more difficult to replicate this from scratch when compared to a new modern rendered home for which materials are readily available.
Factors such as elevation, columns, verandas, glass, spas, decking, garages, and even sporting installations all will need to be considered in your valuation.
Are there any limits to the insurance?
We recommend reading and understanding what is and isn’t covered in the policy you have in place. Ensure you read your Product Disclosure Statement to fully understand the cover you have in place.
To find out more about CGU insurance policy limits, visit Home and Contents Insurance or call our Insurance Specialists on 1300 654 166.