Australian homes underinsured for as much as $443,000, according to new research

Posted: 7 November 2019 5:09 pm

Home Insurance

Home insurance calculators might not be as foolproof as you think.

A new study by MCG Quantity Surveyors has concluded that a massive number of us with home insurance could be underinsured by up to 66%. That means if you needed to rebuild your home, you could be looking at paying as much as $443,399 out of pocket.

The reason? Online calculators, according to the Director of MCG Quantity Surveyors, Marty Sadlier. He says that these "erroneous" online calculators many of us use to get home insurance estimates are not accurate in the slightest. “Most don't include amounts for demolition, debris removal, cost escalations, and consultant's fees”.

The evidence is there to back it up. MCG Quantity Surveyors conducted a valuation on a property in Aird. They took into account the costs that are often overlooked when you get an estimate online. This included construction cost, sums for demolition, removal of site debris and consultant's fees. Their valuation arrived at $668,559.

However, when the same data was used on five different online insurance calculators, the differences in results were huge. The lowest value from an online calculator was $226,160; 66% below what was actually needed. Even the highest online estimate was still 20% underinsured, potentially leaving the homeowner $133,559 out of pocket.

If you’re serious about protecting your home, especially as bushfire season reaches its peak, it’s important to be aware of online calculators. To ensure you’re home is properly protected, follow these tips:

  • Get underinsurance protection: To ensure you don't have to pay a huge chunk of money after paying insurance all those years, look for a policy with underinsurance cover. This type of cover means you have some leeway if you need to pay more than the agreed value of rebuilding your home.
  • Keep on top of your policy. Checking and updating your policy every few years in adjustment with rising housing prices means you won’t be seriously out of pocket if something goes wrong. Otherwise, your insurance might not cover the complete cost of rebuilding if your home’s value has increased.
  • Avoid cutting corners for cheaper premiums. It might be tempting to opt for cheaper home insurance, but it can make paying for insurance pointless if something serious happens and you need to rebuild.
  • Protect your possessions. Imagine replacing every single thing in your house; the costs can really add up. There’s lots people forget about as well, like carpets, furniture and other fittings. Fire insurance or flood insurance can be a good way to take care of everything you own, especially if you live in an area prone to bushfires or floods.

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