Four out of five Australian homeowners are underinsured, but most don’t realise it until they need to make a claim.
We live in a country prone to disasters and risks.
Have a house near a waterway? Floods can sweep it away. In the country? There is always the chance of a bushfire. Suburbia? You never know what thieves may take while you’re away on holidays.
Most people don’t worry too much about these risks because they have home and contents insurance.
However, most people also don’t know that they are probably underinsured, which means that if the worst occurs, there will be hefty bills to pay.
After all, when you’re working so hard to pay off your mortgage, you don’t want bill-shock derailing your progress.
What does it mean to be underinsured?
Underinsurance occurs when the value of the items you’re insuring exceeds the value that you have insured them for.
Generally speaking, if a property is insured for 90% or less of the rebuilding costs, it is underinsured.
Many Australians only discover this once they need to make a claim – and by then, it’s too late.
How could it affect me?
Chances are, if you haven’t updated your home and contents insurance in several years, you will be underinsured.
In fact, according to the Insurance Council of Australia, more than four out of every five Australians are underinsured, risking their homes, valuables and savings in the event of a disaster.
And of course, this is just underinsurance. There is also an astounding 23% of Australians who have no home and contents insurance at all.
How can I avoid it?
If you don’t have insurance, it’s a no-brainer: look into it.
If you are insured, here’s a quick checklist to ensure you’re sufficiently covered:
1. Check your policy and talk to your insurer to understand how much they will currently pay and under what circumstances
2. Pay attention to clauses around fires and floods, particularly if you live in a higher-risk area
3. Make sure all your items are covered – many people find they are underinsured because they forgot to include new pieces of technology, home renovations or jewellry.
4. Consider the worst-case scenario – if your house and contents were to be destroyed, does your policy cover the full cost of rebuilding? Make sure you consider building costs today, rather than the original cost of building your house.
Get in touch and we’ll help ensure you’re not underinsured. That way you can sleep soundly at night knowing there will be no nasty surprises preventing you from paying off your mortgage.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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