With Australia currently enduring its worst bushfire season on record (and Canberra’s January hail storm being labelled a “catastrophe” by the Insurance Council of Australia), we want to talk about insurance. Specifically, the issue of underinsurance.
According to a recent report by the ABC, the Insurance Council of Australia has said that more than four out of every five homes affected by bushfires are underinsured.
What does ‘underinsured’ mean and how does it happen?
Being underinsured means that in the event you make a claim on your policy, the payout you receive isn’t enough to cover the cost of replacing the lost item.
It’s actually more common than you think because homeowners tend to take out insurance based on the market value of their property, which isn’t always necessarily the same as the cost to completely rebuild the property.
Additionally, many homeowners don’t even realise they’re underinsured until the unthinkable happens and they need to make a claim on their policy.
How can you make sure this doesn’t happen to you?
There are a few things we recommend:
Make sure you have home and contents insurance in the first place. The Insurance Council of Australia reports that 23% of Australians don’t have a current insurance policy on their home, which is pretty alarming given recent events. You can see how it happens though. The insurance renewal notice doesn’t reach you, or you simply forget to make the payment. First step is to ensure your policy is paid and current.
Check your policy and pay close attention to clauses around fires and floods. Make sure you understand how much your insurer will currently pay and under what circumstances.
Whilst you’re checking it. make sure all your valuable items are covered. If you’ve had your policy for a few years now, you may have forgotten to include newly acquired items like new laptops, jewellery or take into account any home renovations you’ve recently completed.
Consider the worst-case scenario. Whilst we all like to think the worst-case scenario won’t happen to us, insurance is there to protect us when it does. If your home and its contents were destroyed, would your current policy cover the cost of rebuilding? If the answer is no, it might be time to do something about it.
