How to Avoid Under Insuring Your Home

What does ‘underinsurance’ mean? 

Like being underwhelmed, underinsurance is a lack of the good stuff. In this case, that’s the value of the insurance payout to repair, replace or rebuild your home and contents. This could mean you need to pay out of pocket to get things back to normal. 

How could I accidentally underinsure my property? 

No one sets out to underinsure their property, but mistakes can easily happen. 

• Underestimating the repair and replacement costs: If you aren’t accurate and realistic about what it could cost to repair and replace your home and belongings, you may find yourself underinsured. You may also simply accidentally leave out items or parts of your home when deciding your insured figure. 
• Forgetting to update the insured value: Renovations or upgrades could mean that your repair and replacement costs change. This can also include the changes in building costs over time. 
• Not factoring in additional costs: Depending on your policy, you may need to include costs like demolition and temporary accommodation in your overall insured figure to help keep things moving on smoothly. 
• Lowering your sum-insured cover to lower your premium: While lower premiums are tempting, they may leave you high and dry at the worst time. Finding a balance can be important. 
• Mixing up sum-insured cover and total replacement cover: When comparing Home and Contents Insurance Policies, understanding your cover type matters. It could be hard to make an informed decision otherwise. 

If any of these are ringing bells for you, you could have underinsured your home and contents.

What could happen if I underinsure my property? 

If your home is underinsured, you may not realise it until you need to make a claim. If an insured event were to happen, like damage or loss from theft, a fire or a storm, you could discover that your insurance doesn’t cover all the repairs or replacement costs. This may mean you need to get the money some other way or go without. Either way, it’s all but guaranteed to cause a headache and some heartache. 

What could I do to avoid underinsuring my property? 

If you’re worried about underinsuring your home, there are three steps you could try. 

Be accurate with your calculations

The first hurdle to conquer is to know what you’re insuring. Taking the time to go through your home and list your belongings — along with how much it would cost to replace them — may not be the most exciting Saturday, but you could be incredibly grateful for it later on. Additionally, considering how much it would cost to rebuild your home (this is different to your home’s value, by the way) could also set you up for success. Alternatively, you could speak to a builder or surveyor for an accurate quote based on their professional opinion. 

With these rough figures in mind, you could then use a specialist calculator to estimate rather than guesstimate that final figure to insure.

Consider and compare cover

With an accurate figure to insure, it’s then a matter of looking at different cover options. 

Before you jump deep into comparing Home and Contents Insurance, though, you might like to consider if there are any known risks to your home and belongings. You could then look at cover that includes these risks. For instance, you could live in an area that’s prone to floods, so flood cover might be worth investigating.  

Additionally, as you compare policies, you may like to decide if you prefer one that offers total replacement cover or if you’re okay with sum-insured cover. If it’s the latter, you may want to look into safety net options in case you ever do need to claim for total loss. 

If that inventory of your home happened to highlight you have a few valuable pieces or items that come and go with you, you may find you could add greater value to your overall Home and Contents Insurance too. For instance, you might want to add cover for portable items, like your laptop or mobile phone, so if they’re lost or damaged outside of your home, they could still be covered. For those prized items, like engagement rings or expensive watches, listing them as specified items on your policy could mean you’re able to insure them for a specified amount. If these were lost or damaged at home, your claim could then cover more of your replacement or repair needs. 

As you start to narrow in on your Home and Contents Insurance choice, it might be worth putting the kettle on and breaking out your reading glasses. Looking through the Policy Disclosure Statement (PDS) of each one could help you understand what exclusions there are, like certain events, as well as what your claim limits are.

Keep records and review your policy regularly

Just because you’ve managed to successfully avoid underinsuring your home and contents doesn’t mean the work is done. Where many people fall down is keeping a policy up to date. Renovations and extensions to your home, as well as treats like upgrades and new possessions, could change the amount you want to insure. So, you might like to set yourself a regular reminder every few months to review your policy and the figure you have insured your home and belongings for.  

This can also be a good time to compare Home and Contents Insurance options and see if another policy offers you better value. For instance, you might be able to move from sum-insured cover to total replacement or find a policy with lower premiums without sacrificing your cover. 

What could I do if I find out my property is underinsured? 

If you learn that you’re underinsured, take a deep breath. There are steps you can take to get your Home and Contents Insurance back on track.  

• Figure out what your insured value should be: Writing up a list of what you want to insure and using calculators designed for Home and Contents Insurance can be a good first step. The Insurance Council of Australia has free calculators you could use. 
• Compare policies: While you may have an existing policy, comparing what’s available could help you find an option that offers better value, like total replacement cover or a lower premium. You’ll find information on exclusions and limits too in the PDS. 
• Review your policy regularly: Keeping your policy up to date with changes to your home and belongings could help you avoid becoming underinsured again. You may like to make this a habit before bushfire and storm seasons. 

Where can I compare Home and Contents Insurance Policies? 

While a Home and Contents Insurance Policy won’t create a magical shield around your home, it can be a cushion that softens your fall and makes it easier to get back on your feet if things go really wrong. The trick is making sure that you’ve appropriately insured your property. And we can help. Our online comparison tool allows you to easily compare a selection of Home and Contents Insurance Policies from different providers.* You can also speak with one of our comparison experts on 13 19 20 to get the job done too.