Home and Contents Insurance – are you adequately covered?

According to the Insurance Council of Australia (ICA), approximately 80% of property owners are underinsured.

It’s a startling statistic, but a reality nonetheless.

In the past, bushfires have led to a crisis of ‘underinsurance’. Post-disaster, people come to realise that their insurance is inadequate and does not sufficiently cover their loss. It can be a devastating experience and unfortunately, this year’s situation will be no different.

Now is the time to make sure your Home and Contents Insurance is right for you. We have created a guide to help you get the facts on Home and Contents Insurance and to make sure you’re adequately covered for everything from minor mishaps to major disasters.

Home Insurance and Contents Insurance are in fact separate, but often bundled together. Generally speaking, Home and Contents Insurance covers your home and its structures (sheds, fences, pools etc.) and your belongings (electricals, furnishings, jewellery etc.) against loss and/or damage due to events such as fire, theft and flood.

Home and Contents Insurance is an essential for all of us, but it is important to remember that there is no such thing as a ‘fit all insurance’. Research is key. Luckily, we live in a country with a highly competitive insurance market, so there are dozens of options out there. It’s just a matter of finding the best one for your situation.

When shopping around for the best cover for you and your family, it’s important to take certain elements such as risk factors into consideration. For example, if you live in a suburb that is in close proximity to bushland, you are likely to be at risk for bushfire-related damage and/or loss. Therefore, associated coverage and protection should be a priority for you. Your insurer will also take certain risk factors into consideration through their risk assessment.

Unfortunately, underinsurance can be a stark reality for many and it only really becomes apparent after a major event or crisis.

Discovering that your coverage is inadequate can be devastating. Here are some ways to find out if you could be in danger-zone:

• You know you have Home and Contents Insurance but you aren’t familiar with the details of your policy.
• You’ve had your current policy for many years and don’t regularly review it.
• Your circumstances and general situation have changed, but you haven’t updated your coverage.
• You have chosen to insure your assets to an agreed value rather than their full replacement cost.
• You haven’t been keeping up to date with additional assets and their records (photos, receipts etc.).

If any of these sound like you, you may be at risk of being underinsured.

It is also a good idea to check whether your policy has a coinsurance clause. This provision is often included to make sure that the purchased insurance adequately reflects the value of the property. If you insure your property for less than it is worth, you may get paid less than the amount you are insured for, should you need to make a claim.

For example, if your property is valued at $200,000 but you only insure it for $100,000, a coinsurance clause means you are covered for 50% of the value of what is lost. In this scenario, if you lose $100,000 of property, you will only be paid $50,000 despite your total policy being for $100,000. It’s important to discuss this with your insurer to make sure you completely understand your liability.

The best way to avoid the stress of being underinsured is to be informed and prepared. We’ve put together some helpful tips to ensure you’re fully covered for the future:

• If you’re looking for a new policy, do your research and shop around. Make sure to familiarise yourself with all the options that are available and look out for reviews and official ratings.
• Check the fine print. Make sure you understand your coverage and any exclusions that may be part of your policy. If you come across something that seems unclear, ask your insurer about it.
• Prepare a detailed, room-by-room home inventory of your assets. Take clear photos of your belongings and make sure to keep your receipts/proof of purchase.
• Don’t ‘ballpark’ the value of your assets – ask your insurer to help you with your calculations.
• Be careful with insurance calculators. While they can be handy, they may put you at risk of being underinsured. Choose a calculator that uses your full address rather than just your postcode such as this one created by the ICA. Compare your results with at least two other calculators.
• Home rebuild miscalculations are common. If you believe total home loss is a potential for you, speak to a builder and obtain a quote. Once you have the numbers, get in touch with your insurer to make sure you will be adequately covered.
• It’s always better to be safe than sorry. Get in touch with professionals who can help you make the right choice.

Our team is always here to discuss your financial security and can connect you with an appropriate general insurance specialist. If you have any questions please contact us today.