Food For Thought On Insurance
31 October 2014 Lisa Favelle - Capital Insurance Brokers
It’s not everyone’s favourite topic, but it is such an important one that it warrants a little bit of your time. Have you reviewed your insurance in the last 12 months? Are you confident that your home or investment property is adequately insured?
In Australia it is estimated that over 30% of homes are uninsured. And of those who do have the cover, more than 40% are severely underinsured. The tragedy is that most people who have insufficient cover don't realise it until a significant loss occurs. The issue of underinsurance was highlighted in Canberra following the 2003 bushfires, so much in fact that it prompted ASIC to produce a report into underinsurance in Australia. See this link for details: ASIC Report
Things to consider when insuring your home:
Building cover is not only for the main dwelling, but also the garage, pergola, retaining walls, gates, fences and in-ground swimming pool etc. Your sum insured needs to represent the cost to rebuild your home, including all these things as well.
Contents also need to be insured for their full replacement value. Not just the big furniture items and expensive electronic goods - all of your belongings including clothing, jewellery, the contents of your kitchen cupboards, linen, carpet, curtains & blinds etc. As no two people are exactly the same, neither are their belongings. To ensure you have adequate cover we suggest assessing each room in your house one by one, and considering what it would cost to replace everything in it. If you need some help to get started, here is a basic table of common rooms and contents that may help.
When it comes to your Investment Property – Check the definitions in your specific policy (PDS) to find out what is considered part of the building, and what is landlords’ contents. Often fixed floorcoverings (eg tiles) and external blinds/awnings are defined as ‘building’, but carpets, floating timber floors and internal window dressings are ‘contents’. If you are the owner of a strata title unit you may also need to include in your contents sum insured any fixtures and fittings that you have installed (unless the body corporate already has insured them.) For strata unit owners, it is also advisable to include internal painting costs in your contents sum insured. How this is defined and covered differs from state to state (according to each Strata Act) and also varies between insurers.
Many people only read their policy when they need to make a claim. Unfortunately, by this time it's often too late. Check your policy wording (or ‘PDS’) now to see how much your insurer will pay, and under what circumstances. Also check when your insurer will not pay a claim (often labelled as ‘When you are not covered’ or listed as ‘Exclusions’) so that there are no nasty surprises come claim time. Your PDS (product disclosure statement) is often a booklet you receive with your policy schedule, and it will tell you exactly what you are paying for (and remember you usually only get what you pay for!)
Many insurers have online calculators to assist you in calculating your sums insured. An example of one can be found here: CGU Home Insurance Calculators