Under-insurance is a serious problem in Australia, especially for home and contents cover. It means that, even if a household is insured, the value of their cover is not enough to repair or rebuild their home, or replace all of their precious contents.
There are many reasons why people are under-insured. It’s normal to accumulate more belongings over time, or to upgrade the ones you have, but unless you proactively revise your cover in light of these changes your insurance won’t always reflect these improvements.
A hidden cause of under-insurance can also be the increase in rebuilding costs over time. Do you really know how much it would cost you to rebuild your house today, if it were destroyed by fire or flood? It’s likely to be a very different figure from an estimate you worked with 5 years ago.
So how can you find out what insurance cover you need, and how much is the right amount? There are some really helpful online calculators that you can access for a quick, free and confidential assessment of your building or your contents.
It is important to note that an insurance calculator will estimate how much insurance cover you need. This is the maximum amount that your insurer will pay you, in the event of an accident, emergency or burglary. It is different to the policy cost which is the annual amount you pay to your insurer.
An online calculator asks you for key information about where you live and the size of your house. It will also ask you about the number and types of rooms in your home. This helps the calculator to estimate how much your contents are worth, and what the replacement value would be. A calculator also prompts you to input any special items you would want to insure, such as antique furniture, musical instruments, collections or other special items you own. These are the kinds of belongings that have significant value, are of a ‘one off’ nature and may be difficult to replace. Once you input all these details, within seconds the calculator will give you an estimate of the amount of cover you should obtain from your insurer.
Each online calculator will ask slightly different questions, so it pays to shop around and get a few different quotes for comparison. Even if you would prefer to talk to an adviser, using an online calculator can be a very useful tool to prepare all the information your adviser will need, and to give you an idea of the amounts of cover your adviser will suggest.
The Insurance Council of Australia represents Australian general private sector insurers. They have a handy website with several easy to use calculators: http://understandinsurance.com.au/calculators
We also recommend using CGU’s home and contents calculators, which should take around 10 minutes to complete: http://www.cgu.com.au/insurance/personal/learn-about-insurance/calculators