Feb 13, 2020 11:32:02 AM

Underinsurance a real concern in Australia

Topics: Insurance, Underinsurance, Home Loan Advice, Mortgage Protection Insurance, Home and Contents Insurance, Vehicle Insurance 0

The 2020 bushfire season has left many Australians devastated without homes and livelihood. Even more devastating is that so many of those affected by the bushfires are underinsured. Understanding what events and damage can be covered by insurance is a vital first step in assessing whether or not you have the right cover for your home.

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Understanding insurance cover
We’re exposed to risk in all areas of life and insurance is the best way to minimise exposure to risk. Unfortunately, we don’t always get it right. Whether it’s health, car, life, income or mortgage protection insurance, it’s possible you don’t have enough cover for your needs.

Ensuring you’re adequately covered starts with a clear understanding of what your insurance currently covers. It’s vital you talk to your insurance company or an insurance broker about your specific cover requirements to ensure you’re adequately covered in the event of a loss.

Typically, home and contents insurance covers:

Storm and flood cover, including damage caused by lightning, cyclones, strong wind, rainwater, hail and snow. Some policies offer optional flood damage cover but even if you opt to pay for this there may be exclusions, so it’s worthwhile checking these if you are in a disaster-prone area.

Fire cover against damage caused by fire including bushfire. If you live in a disaster-prone area, it's worth considering 'total replacement cover', which covers the cost to repair or rebuild your home to the same standard.

An alarming issue
The Insurance Council of Australia (ICA) has warned that most households are underinsured or have the incorrect insurance in place; perhaps as high as 80% of all insured homeowners. Underinsurance means the amount a homeowner insures their property for does not cover the actual rebuilding cost.

Given the increase in catastrophic weather events in Australia over the past few years – and more recently, the devastating bushfire season – this is an alarming issue that could detrimentally affect many home owners. Taking out less cover than you need might help you save on premiums, but it can end up costing you and your family in the long run.

Are you adequately covered?
Apart from not getting enough insurance money to cover your loss when you claim, underinsuring your home could mean your insurer only pays out part of your loss because you’re only insured for part of what it’s worth.

A helpful tool to calculate your insurance values, which is often on most home insurance websites but supported by the Insurance Council of Australia, is the Cordell Sum Sure Calculator. Through the Understand Insurance website, you can get closer estimates for your Contents and your Home, as the best way to prevent underinsurance is to make sure your home and contents sum insured values are up to date.

If you’d like insurance or financial advice, get in touch with a Mortgage Express broker.


Disclaimer:

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.