According to an ICA analysis, a concerning four out of five Australian homeowners and renters are underinsured, despite having policies in place – reminding brokers to advise their clients to review and update their home and contents insurance policy to ensure they're protected when something goes wrong.
In one alarming example, RACV home insurance data showed that 65% of its members whose homes were razed in the Wye River bushfires on Christmas day, 2015, were underinsured – some by more than $100,000.
Stacey Maher, RACV's home insurance general manager, said householders risk not being adequately covered when disaster strikes when they don't regularly review and update their policy as their home, possessions, and life circumstances change,
Domain reported.
“You get your premium each year and you pay it. You don’t think about what’s changed throughout the year,” Maher said, as she cited the three key areas Australians often overlook when paying their annual premium.
“The first one would be around when homeowners do renovations or home improvements,” she said. “People tend to forget that if they’ve added an upstairs area or extended out the back, that does cost a lot of money.”
For householders in rural areas and bushfire-prone regions, it is critical to check whether there have been changes in building codes and regulations, as that might increase the cost of rebuilding should the property be severely damaged. Some homes end up underinsured because an insurance policy no longer reflects contemporary rebuild costs, the report said.
Another factor that contributes to the lack of adequate insurance is the accumulation of possessions throughout the year, which many people forget to keep track of, and update their contents insurance to include new belongings.
“You do tend to collect things over the year and not realise it because it might be in little increments,” Maher said in the
Domain report. “And it’s the mundane things that can really cost a lot. If you did have to start again and buy all new clothes, shoes, dinner plates, and cutlery, those things really add up.”
The third factor, Maher said, is the lack of awareness of policy limits and how much they are insured for.
“Under general contents with RACV home insurance, there are certain items like jewellery and watches and works of art that are only insured to a certain amount, and that’s stated on the policy,” Maher said. “Sometimes they can get overlooked. People might forget that they have $10,000 worth of jewellery but the policy only insures them to a certain amount.”
According to the
Domain report, if items such as jewellery and watches aren’t listed in home contents insurance as “specified items,” then they are only covered for up to $1,000 under “general contents.” Only by making sure that these items are covered their total value that householders can be secure that they are protected in case of burglary or loss. Also, listing these items as ‘specified portable valuables’ covers them for loss both inside and outside the home.
Other types of coverage householders can consider within a home contents policy include optional accidental damage and optional cover for fusion of electric motors,
Domain reported.
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