Do you know if you are underinsured?

You get medical checks to prevent or treat disease, but do you pay the same sort of attention to your finances; in particular, home insurance? The truth is that many of us don’t, which can easily leave us underinsured. This means we don’t have adequate coverage and could lose a lot more than the damage or loss inflicted by a natural disaster or theft.

Review your policy

Contact your insurer to see if their policy is adequate for your home. It should suit your needs and factor in your location and propensity for disaster to strike or theft to occur.

Ask lots of questions

Insurance can be daunting but your insurer should be happy to demystify the language, explain the policy limits, deductibles and what is covered. For example, do you live in a flood prone area and do you know how flood is defined in your policy? Your local council should also be able to help you ascertain your risk level for events such as flood and bushfire.

Explore your home in detail

It’s important to take an inventory of all your assets by recording the price and estimated replacement cost. Keep receipts, take photos and video of your contents and store that information at a secure location. Don’t forget things like art, antiques and wine collections too. There are plenty of apps and helpful online calculators that can streamline this for you so check out your favourite app store or ask your insurance provider.

Know your true worth

Please make sure you factor in the increased value of your home if you have recently renovated or refurbished you’re home. Don’t forget to add in any additional valuables such as whitegoods or if you have updated furniture, fixtures, fittings and appliances recently. It’s also important to remember that building regulations can change regularly, which could impact the costs required to rebuild your home in the unfortunate event of a total loss.

As our lives change, so too do our needs - that’s why it’s important to regularly assess how much protection you need with this simple insurance calculator, because if your insurance covers less than your rebuilding costs, then you are considered to be underinsured. What it boils down to is that underinsurance may result in economic losses to you as the claim would exceed the maximum amount that can be paid out by the insurance policy. While underinsurance may result in lower premiums, the loss arising from a claim may far exceed any marginal savings in insurance premiums.

Diarise a regular date to undertake an insurance health check and see if you could be doing better – receiving your insurance renewal notice is often a good reminder to do this. And if you make any changes, contact your insurer to ensure your cover is up to date.

Insurance issued by Insurance Australia Limited ABN 11 000 016 722 trading as CGU Insurance. Any advice is general only. Consider the relevant PDS available from queenslandcountry.bank to see if a product is right for you. 

[1] Australian Securities and Investments Commission, ‘Risk of underinsurance’, Moneysmart, viewed 7 January 2016.