Risks of being under-insured

Each year, millions of Australians gamble their most precious possessions to save a few hundred dollars on insurance, thinking ‘it won’t happen to me’. However, weather activity throughout Australia in the last few years highlights that natural disasters can have devastating effects on our belongings. 

The Australian Bureau of Statistics estimates that about 1.8 million Australian households have no home and contents insurance – which is nearly one quarter (23%) of all Australian homes.  

Even for those with insurance, not everybody regularly checks that the level of insurance they have is the right amount for them. Often, only when it comes time to make a claim that consumers realise they do not have adequate insurance cover.

Under insurance is often the result of nominating a value for an asset such as your home that is too low to actually replace it in the event that it is damaged or destroyed.  Consumers often don’t take into consideration that if you ever need to rebuild your house, you not only have to pay the costs of labour and materials but will also be faced with a range of extra or 'supplementary' costs including paying for:

 
  • Alternative accommodation while your house is rebuilt.
  • Removal of debris from the site.
  • Architects or other professionals to draw up plans.
  • Services to make your property safe for workers.
  • Lodging plans with your local council.

It is important to check your policy to ensure extra costs, such as those mentioned above, are covered and whether they are paid in addition to your sum insured or if they are deducted from your sum insured. If it is deducted, you may have to look at increasing the sum insured to include these costs, so that in the event of a total loss your out of pocket expenses are minimised.

Did you know that if your buildings or contents suffer loss or damage and you are unable to live in your home as a result, CGU will cover the costs of alternative accommodation for up to 12 months, as well as the reasonable costs to demolish and remove debris, and rebuilding fees?

Each year, before you renew your policy, it’s also worth reviewing the replacement value of your building and contents so you can adjust your cover accordingly, if needed. If you have renovated your property, upgraded any furnishings or purchased any new major items for your home since your policy was taken out, ensure that you update your insurance to reflect this. This will avoid much of the hassle, frustration and potential financial hardship that under insuring your home can cause. If you would like to find out more, speak with one of our friendly Insurance Consultants on 1300 654 166

Important Information:
This information does not take into account your objectives, financial situation or needs. Therefore you should firstly consider the appropriateness of this information and refer to the Terms and Conditions and Product Disclosure Statement (PDS) before acquiring a product. These documents are available by contacting us on 1300 654 166.