What to consider when insuring your property

By the resi financial blog team, 21 January 2015

What to consider when insuring your property

While insurance is a topic we all hate to discuss, in this country of drought and flooding rains (as well as raging bushfires and torrential storms) not properly insuring your property is too big a risk to ignore.

Underinsurance is a key problem in Australia. And it’s only when a tragedy such as a bushfire or flood occurs and everything is lost, does the importance of having insurance sink in.

So what are the key considerations?

Premiums are generally renewed once a year. Make this the time to check to see you are properly covered. And don’t just accept what your current insurer offers you. Ring around to get a few quotes to help with your negotiations.

One of the reasons why we tend to underinsure is because the onus of estimating the cost of rebuilding is down to us. In many cases, we take a guess at what the rebuilding costs will be and this is a very inexact science.

Some of the factors you should consider when updating your insurance, is what the cost of rebuilding your home would cost now, rather than when it was first built. You should also factor in the costs of engaging an architect, surveyor and engineer, as well as the costs of the materials and finishes used. Legal costs and council plan approval fees also need to be considered.

And remember, you will need to find somewhere to live while your home is being rebuilt so check to see if your insurance covers you for temporary accommodation.

There are two key types of property insurance: total replacement or sum insured. Total replacement cover includes all costs associated with rebuilding your home to the standard it was prior to being destroyed.

The more common sum insured cover, covers you only up to a set amount.

Whatever insurance you end up buying, make sure you read all the fine print so you don’t get any surprises at a time that is likely to be one of the most distressing you’ll face.

Categories: property, property insurance, underinsurance