Underinsuring your home might be one of the biggest and costliest mistakes someone could make, according to the RACV.
The worst time to find out you’re underinsured is when you need to make a claim under your cover unexpectedly — like a tree falling through your roof, or a treasured item getting stolen.
Underinsurance is when the nominated sum insured amount on your policy is too low to help cover the replacement value of your home and contents.
While the task of painstakingly going through the entire contents of your house and calculating what it would cost to replace – from your saucepans and office equipment to your designer shoes and TV unit – can be laborious, it may be a process that helps should an insured event, such as fire, theft or storm, occur.
According to the Insurance Council of Australia, 23 per cent of Australian homeowners – or 1.8 million households – don’t have enough insurance to cover the true value of their home and contents should disaster strike.
When something unexpected happens, such as a natural disaster or burglary, unfortunately, many people find that they fall into this category and are underinsured.
In other words, they do not have sufficient insurance to help cover the cost of rebuilding and replacing their home and possessions to the same standard.
RACV head of home and business insurance Kirsty Hayes said there are a few main causes as to why people may be underinsured.
“From talking to RACV Members, we believe two key reasons for underinsurance are that many forget to appropriately insure items around their home, and they also forget to update their insured values to reflect today’s replacement values,” she said.
So how can householders help make sure their insurance accurately covers the true value of their home and all the valuables inside?
A simple way to estimate what it might cost to rebuild or repair your home in the event of a disaster or damage is to use the RACV Home Buildings Calculator, which takes into account factors such as when your home was built, and to what standard.
The calculator also includes the cost to demolish and remove debris, which should be included in the sum insured.
You can also use a household inventory checklist, set aside some time to walk through every room in your house, and research what each item would cost to replace.
For more information visit racv.com.au
