The recent disasters in Queensland and New South Wales have reinforced the need to maintain adequate property insurance in case the unthinkable happens.
But what does adequate property insurance actually mean?
Ideally you should have a level of insurance that would cover the total cost of replacement of your property. This should include the cost
- Of clearing the property of debris and rubbish
- The cost of rebuilding the property using the same materials that were used to build the property
Working out replacement cost isn’t easy. If you know a builder who you can rely on, they can give you an accurate estimate of what the cost of rebuilding your property from scratch would be. Alternatively, many insurance companies will have insurance calculators available on their websites for you to work out what the cost would be.
It is critical that you give this some time and though as the dangers of being under insured are that the insurer could choose to void the insurance policy and refund all insurance premiums paid or to pay a lower payout than you are insured for. Generally you are considered to be underinsured if you are insured for less than 90% of the value of the cost of replacement.
There are many reasons you could be underinsured. These include a lack of understanding of what replacement insurance means, a failure to keep up with the rising cost of building and materials or some confusion about the sale value and the cost of building.
If you need assistance with ensuring that you have adequate insurance or would simply like to reassess your insurance arrangements do not hesitate to contact the team at Australian Finance Hub.