Plan to avoid payout pain
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.