Why you should review your insurance
Shockingly, the Insurance Council of Australia has found that 83 per cent of households believe they may be underinsured. That stat might have you asking, “how does that happen?”
It can happen quicker than you think. In 2019, I bought a house and took out home and contents insurance to ensure we were covered in an unexpected event.
As part of the process, we let the insurer know how much coverage we wanted by estimating the value of our home and contents at the time (this is called the sum insured in insurance lingo). Then we forgot about it.
Since purchasing our home, we’ve renovated the bathroom, replaced the flooring and even installed a solar and battery system.
At the same time, the cost of living has been increasing. In fact, construction costs have increased by 25 per cent in the past five years, according to CoreLogic.
If, one day, we need to make a big claim and haven’t updated our insurance, we might suddenly find our home’s new value is far more than the price we insured it for. This means the payout might fall short of the cost required to repair or rebuild. So, how can you avoid being underinsured? Here are a few ways you can prevent being caught out.
Get it right in the first place
There’s a lot to think about when buying a house, so you might have valued your property incorrectly when you first took out the policy. Now’s a good time to check. You’ll want to think about the cost of rebuilding your house from scratch. Remember, construction costs have increased in the past few years.
Update your insurance when you undertake renovations
Re-tiled your bathroom or revamped your kitchen? If you’ve added a room, updated your kitchen with new appliances, or bought some furniture, you’ll want to make sure these additions are reflected in the sum insured for your home and contents by updating your insurance. This ensures your home and included possessions are covered to the correct value.
Check your insurance regularly
Many insurance policies will renew annually. Whatever your policy period, your insurance provider will advise you in advance when your policy is coming up for renewal. This is a great time to update your cover if you’ve made any changes to the house or bought expensive new possessions.
Do your calculations
It can be difficult to get an accurate picture of everything you own. A good way to make sure you’ve included everything is by compiling a room-by-room inventory. Estimate the value of your contents in each room. Include everything from clothing and electronic devices to curtains and kids’ toys.
For help assessing the value of your property, you can use RAA’s sum insured calculator.