REST INSURED

Adequately insuring your home and everything inside it brings peace of mind, writes

Eight out of 10 homeowners and renters are “exposed to significant financial loss because their insurance does not cover them to resume the same standard of living in the event of a crisis”, reveals a 2014 report by Quantum Market Research for the Insurance Council of Australia. The report also found that more than half of all householders who have contents insurance do not update it when they purchase a high-value item.

It’s vital to understand what sort of insurance you need, and how much of it. Underinsuring can leave you with a gap of tens of thousands – even hundreds of thousands – of dollars between an insurance payout and the cost of replacing your home and contents.

Building and contents insurance covers fire, explosion, water damage, storm, theft and an even bigger threat: public liability. This is protection against being sued for damage, injury or even death. What if a visitor trips and sustains an injury? What if a tree on your property falls and destroys a neighbour’s house? If the plaintiff can prove negligence (such as a loose floorboard), the subsequent court award could be in the millions.

If you’re building, ensure the builder has all necessary insurances, including home warranty, public liability and workers’ compensation insurance.

Many homeowners underestimate the cost of replacing their house if it’s damaged or destroyed. Building costs are constantly rising and there are other outlays to consider as well, such as architects’ fees, demolition and fencing. Some insurance companies and brokers have online calculators to help you work out approximate replacement costs.

For contents coverage, walk through every room of your house and write down the replacement cost of each item. Items of high value, such as jewellery and antiques, are usually listed separately. Photos of such items, and their receipts, are useful for claims.

“No two policies provide the same coverage,” says Mike Donnelly, principal of Donnelly Insurance Brokers. There are two types of home insurance policy, he explains. ‘Defined events’ only includes events specifically mentioned in the policy. An ‘accidental damage’ policy, however, covers all events not specifically excluded in the policy and usually also covers contents temporarily removed from the premises.

Interestingly, your premiums may be higher or lower than the house across the road, says Donnelly. “Insurers can now rate a particular property risk based on claims statistics, a policyholder’s claims history, flood-mapping data, bushfire-hazard assessment, crime area reports and Google search.”

Many insurers provide an ‘extra cover’ feature, he adds. This protects you against a declared catastrophic event such as a cyclone, bushfire or flood. “Extra cover of up to 30 per cent is provided to meet the increased cost of repairing or rebuilding due to a labour and materials shortage.” If you live in a high-risk area, check your policy. #