With many parts of Australia experiencing unseasonably hot weather, now is an ideal time to consider your insurance coverage to ensure your property is adequately protected.

We can all remember the devastation of the 2020 Black Summer bushfires, which engulfed large areas along the Australian southeast coast on an extraordinary scale. The extensive property damage left many survivors relying on their insurance companies for help with rebuilding, but unfortunately, some property owners were “underinsured.”

The risk of underinsurance

 Underinsurance is a common issue in Australia, making it difficult for those affected by natural disasters—whether it’s a bushfire, flood, or cyclone to rebuild their homes or replace their belongings to the same standard prior to the event.

In other words, underinsurance occurs if you don’t have sufficient insurance to cover the replacement value of the items you’re insuring. Unfortunately, most homeowners who find themselves underinsured do so because they haven’t properly calculated the current replacement value of their property and belongings.

Common causes for underinsurance

1. Guessing replacement costs

According to the Insurance Council of Australia (ICA), one of the most common mistakes Aussies make is guessing the cost to repair, rebuild, or replace their property and contents. Fortunately, these mistakes can be easily side-stepped using a building and contents insurance calculator. For instance, the ICA has partnered with CoreLogic to offer a calculator that estimates the cost of rebuilding your home in the event of significant damage from a natural disaster. Click here for the Building Insurance Calculator. Just enter your address and fill in details such as bushfire risk, the number and size of rooms and bathrooms, garage spaces, verandas, and more. In about five minutes, the calculator will give you a rebuild cost that you can compare with the sum insured on your current insurance policy.

2. Not accounting for upgrades to your home and belongings

Many homeowners have been motivated by popular DIY shows such as The Block, leading to spending on property renovations, new furniture, and upgraded appliances. However, it’s easy to forget to update your insurance after making these home improvements, which can cause financial issues if you need to make a claim.

At the same time, many homeowners tend to underestimate the value of their assets. The contents of your garden shed, such as your lawnmower and tools, are often overlooked. The same goes for your wardrobe, which might include six pairs of sensible shoes, three pairs of stilettos, and some expensive trainers. It’s essential to consider whether your insurance would cover all these items if you needed to replace them.

3. Increased building costs

A surge in state government infrastructure projects has drawn in many tradespeople, driving up demand and increasing fees. Additionally, widespread attention has been given to rising building costs, fuelled by pandemic-related supply chain disruptions and general cost-of-living increases. These escalating expenses are also linked to the need to comply with updated building codes, the challenges of constructing on difficult sites, and the rising costs of materials.

Homeowners should also account for supplementary expenses, including the cost of demolishing the remains of the existing building, clean-up, asbestos removal, council applications, architect and surveyor services, and even temporary accommodation during a rebuild.

 The key is tracking and calculating

After doing some homework, including using the available online home and contents calculators, you might find that you need to pay a bit more to ensure your home isn’t underinsured. However, the good news is that increasing your house and contents and building cover may not be as costly as you think. By shopping around, you might even discover that you can get additional coverage for the same price. Just be sure to compare the difference in coverage offered by various insurers, not just the price.

 Contact Our Broker today at 1800 913 677 to explore your home and contents options.