Plan to avoid pay­out pain

The Weekend Post - Real Estate - - Front Page - BIANCA KEE­GAN

IF 40 per cent of house­holds are fail­ing to cor­rectly as­sess the value of their home and con­tents, chances are you may be fac­ing a mishap when it comes to in­sur­ance.

The In­sur­ance Coun­cil of Aus­tralia es­ti­mates that about 40 per cent of house­holds are not prop­erly in­sured, leav­ing them ex­posed to fi­nan­cial loss.

Be­ing “un­der- i nsured” means the value you have in­sured your prop­erty for un­der your pol­icy is not enough to cover the value of the items you are in­sur­ing.

The Aus­tralian Se­cu­ri­ties and In­vest­ments Com­mis­sion (ASIC) ad­vises res­i­dents to take into ac­count the value of their fur­ni­ture, clothes, ap­pli­ances and jew­ellery.

“When work­ing out how much home and con­tents in­sur­ance you need, start by list­ing all your be­long­ings and work­ing out how much it would cost to re­place them,” the ASIC re­port states.

“Tak­ing pho­tos and do­ing it room by room is sen­si­ble be­cause you may be sur­prised by how much you have.

“You may want to set up an on­line in­ven­tory for th­ese de­tails which can be stored away from your home.”

The type of cover will also af­fect the pre­mium you pay so it is worth check­ing if your house is cov­ered for a bur­glary, fire or any ac­ci­den­tal event.

“There are two main types of con­tents in­sur­ance – poli­cies that cover the value of be­long­ings (and) poli­cies that re­place your be­long­ings with new items.

“Most in­sur­ers pro­vide lim- ited cover for valu­ables such as jew­ellery. You may need ex­tra cover to ad­e­quately in­sure th­ese type of valu­ables.”

Com­par­i­son web­site Canstar likened in­sur­ing a prop­erty for less than its re­build cost to “in­sur­ing a Porsche at a Hyundai price”.

“You might get away with it but at some stage the gap in cover is go­ing to come back to haunt you,” the site says.

“Apart from not re­ceivin­ge­nough­home in­sur­ance money to cover the cost of your loss, there’s an added risk that can be far greater.

“If you have sig­nif­i­cantly un­deri n s u r e d yo u r home or con­tents your in­sur­ermay havethe right to pay only part ofany l oss be­cause you’ve in­sured for only par t o f what it’s worth.

“Let’s say you in­sure your home for $ 150,000 but it ’s re­ally worth $ 250,000 and a fire does $80,000 dam­age.

“Your in­surer may have the right tore­ducethe pay­out in pro­por­tion to the level of un­der­in­sur­ance. In this case, there might be a pay­ment of only $48,000.” • If you have made any sig­nif­i­cant pur­chases dur­ing the year, such as jew­ellery, check to see if you need to list th­ese item sep­a­rately un­der your pol­icy. • Re­view your sum-in­sured when you un­der­take any ren­o­va­tions or al­ter­ations that might af­fect the value of your prop­erty. • Check whether your pol­icy cov­ers sup­ple­men­tary costs – other ex­penses you’ll be up for if your home needs to be re­built, such as tem­po­rary ac­com­mo­da­tion. • On­line in­sur­ance cal­cu­la­tors can help you cal­cu­late the value of your as­sets and en­sure you have the right level of cover. • Re­mem­ber the cost of re­build­ing your home is not the same as its real es­tate value.

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