Under-insurance is when the value something is insured for is not enough to cover the full value, leaving a shortfall if it has to be replaced.
Recent research has shown eight out of 10 home owners and renters are under-insured for their home and contents.
This happens when people don’t properly value their assets – or consciously choose lower cover because they want to pay less for insurance. The industry survey found one in 10 Australians deliberately under-insure, to lower their premium.
Under-insurance can mean you end up paying the gap between your insurance pay-out and the costs of replacing or repairing your building, plus other costs, such as rental accommodation, while your insurance claim is assessed and finalised and rebuilding is underway.
Consider what would happen to your life and your family if you didn’t have insurance and your property is badly damaged or destroyed. How would you rebuild?
Most people end up under-insured because they;
- Renovate, increasing the value of their property, but don’t change the sum insured on their policy
- Purchase a policy based on a premium they want to pay and then live with the level of coverage provided
- Don’t realise the costs involved with rebuilding or replacing items
- Purchase new items, but don’t include them in the sum insured.
The best way for owners and renters to work out if they have enough cover is to use an independent calculator.
If the amount the calculator shows is different to your sum insured, consider reviewing all your assets in greater detail by carrying out a room-by-room inventory. An inventory may also be useful if you need to make a claim.
Surround yourself with a team of professionals who can provide you with ongoing support and expertise in securing your financial future.
The Addisons Team are here to help!
