Insurance may not have you properly covered

AUSSIES are in danger of being underinsured when it comes to home and contents, new Galaxy research for iSelect reveals.

The survey of 1144 Australians found around 83 per cent of homeowners have home (building) insurance, but just over half (58 per cent) believe their current level of cover is accurate, while 29 per cent say they are probably underinsured and 7 per cent say their home is definitely not insured for its full value.

The complexity of the policies can be a major factor in people being underinsured, according to iSelect chief executive Scott Wilson.

“Home and contents insurance policies are really complicated,” Mr Wilson said.

“It can be incredibly difficult for customers to accurately estimate how much it would cost to rebuild their home. As a result, many customers tend to underestimate the cost … and risk being left significantly out of pocket should their home be damaged or destroyed.” Customers who were not confident in their knowledge of the topic often just stayed with the same insurance providers, which meant they could be missing out on the best coverage and most suitable policies.

“The complexity of comparing policies resulted in many auto-renewing their policy,” Mr Wilson said. “Over 40 per cent of policy holders told us they simply accepted the recommendation of their existing insurer and renewed their policy for the amount suggested. As a result they could be paying more than they need to, or not have the appropriate level of cover, particularly if their rebuild cost has changed as a result of renovations or improvements.”

The confusion prompted iSelect to launch a new home and contents service, in partnership with CoreLogic, which uses a construction data calculator to help customers estimate how much it would cost to rebuild their property.

The research also found around 85 per cent of homeowners have contents insurance, but 28 per cent admit they don’t understand their policy.

Many don’t realise just how much they have accumulated over the years, said Comparethemarket.com.au spokeswoman Abigail Koch.

“When you first take out a policy you can predict the value of your possessions, but when you think about clothes, even make-up, these things all add up and we find our cover is out of date,” Ms Koch said.

“As a general rule, it’s good to recalculate the value of your possessions every three or four years.”

Price rises over time could also take people by surprise.

“A sofa bought 10 years ago could not be bought at the same price today,” she said. “Think about what these things would cost to replace in today’s terms.”

A simple way to get proof of purchase was to take your mobile phone around, recording the contents of different rooms of the house, Ms Koch said.