Is Your Home At Risk Of Underinsurance?
Underinsurance occurs when you have insurance that’s not quite right or does not provide enough cover for your personal circumstances, or you don’t have insurance at all. The Insurance Council of Australia (ICA) estimates that 23% of Australian households do not have building or contents insurance, meaning that about 1.8 million residential households are not protected at all. While some may underinsure their property on purpose, usually in the belief that ‘it’ll never happen to me’, for many others the shortfall is unintentional.
Other factors that lead to underinsurance include failing to take into account increased building costs and not adjusting Sum Insured value following major renovations. Sometimes underinsurance results from people choosing a lower Sum Insured value to reduce their insurance premium.
Most Australians have inadequate protection, with the Australian Securities and Investments Commission stating that up to 80% of homeowners are underinsured. If the total amount you have insured your home for is less than what it would cost to rebuild then you are underinsured. In case your home is damaged or destroyed, you might not have enough financial capacity to pay for any costs not covered by your home building insurance policy. The large-scale losses experienced after the 2020 bushfires and 2021 Queensland and NSW floods serve as a reminder of the importance of insurance in avoiding financial losses.
ADF members and veterans who are renting due to posting and other circumstances should also check to ensure they have adequate cover for their contents.
For tips on how to fix this situation, visit the DSH Insurance website.
