Underinsurance protection

There are two main underinsurance protection options: a sum insured safeguard or full building replacement cover.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

If your home is damaged or destroyed, underinsurance protection can make sure your home insurance policy is able to cover the costs. Your options are a sum insured safeguard, which you'll often need to pay extra for, or full building replacement. We've outlined who offers them below.

Get underinsurance protection: Compare 7 home insurance policies

A sum insured safeguard works like this: if your nominated sum insured is insufficient to repair or replace your home, the insurer will give you a buffer to help cover the costs.

Only one policy available on Finder offers total replacement cover. It covers the cost of rebuilding your home to the state it was in prior to the insured event.

Name Product Sum Insured Safeguard Full Building Replacement Building Cover Contents Cover Online Discount Cheapest way to pay
Budget Direct Home & Contents Insurance
Optional
Annually
Save 30% on your first year's premium when you purchase a new combined Home & Contents insurance policy online. T&Cs apply.
St. George Home and Contents
Monthly or Annually
Save up to 25% when you purchase cover online. Promo code: COVER
Domain Home Buildings & Contents Insurance
Monthly or Annually
Domain Insure uses property data to help build your quote faster.
Virgin Home and Contents Insurance
Optional
Annually
Purchase a new eligible Virgin Home and Contents Insurance policy online and you'll also save 30% on your first year’s premium. T&Cs Apply.
Seniors Top Home & Contents Insurance
Annually
Buy online and save up to 30% on a new home and contents insurance policy. T&Cs apply.
Youi Building and Contents Insurance
Annually
Youi Home Insurance takes the time to tailor a premium for you.
Huddle Comprehensive Home and Contents Insurance
Annually
Save up to 20% on your policy in the first year.
Qantas Home and Contents Insurance
Optional
Annually
Earn up to 20,000 Qantas Points when you apply. Points awarded will be based on your premium. T&Cs & exclusions apply.
loading

Compare up to 4 providers

What is underinsurance?

Underinsurance is when someone does not have adequate insurance to cover the cost of damage or loss to their property or possessions.

Your home is probably your most valuable asset. That’s why it’s especially important to ensure that you have enough insurance to cover you if something bad were to happen to it. Having your house underinsured in the event of a natural disaster (which is, unfortunately, a common occurrence in Australia) could result in having to pay out substantial sums of money and could be financially crippling.

Am I at risk?

There are a number of reasons why you might be underinsured, but the most common is simply inaccurate insurance. Here are a few tips to ensure you have adequate cover:

  • Keep track of your policy. Check your policy every few years and make sure that it still covers you completely, especially if you’ve renovated or purchased new furniture. Your insurance may no longer cover the complete cost of rebuilding if your property value has increased.
  • Note your neighbourhood value. If your neighbourhood has begun to increase in value, this may have pushed the value of your house up. If so, your insurance policy might also need to increase. If your insurance policy is reflective of the property’s value when you bought it as opposed to what it is valued at today, the house is most likely underinsured.
  • Don't cut corners. Another common driver of underinsurance is an attempt to save money. Some people believe a comprehensive home insurance policy is too expensive, but the cost of being underinsured could be far greater down the track if an unexpected disaster means that you’re starting from square one.
  • Cover everything with a high replacement cost. You might have building insurance for damage to the structure of your property, but some people choose not to cover their contents. You might not think that you have much of particular value, but consider the cost of replacing every single thing in your house, such as in the case of a fire or a flood, and it really adds up. For instance, people might forget to include the price of fittings, carpets or curtains.

Being underinsured might not be intentional. Many people simply underestimate the value or miss out on whole categories of items when giving an estimate.

What happens if I am underinsured?

If you’re underinsured and in a position where you have to make a claim, you won’t receive the full cost for the damage done. The settlement you’ll receive for a claim on underinsured property will be according to the actual sum insured. You will then have to cover the rest of the cost from your own pocket.

How do I prevent it?

The number one trick is to check your insurance policy, your coverage levels and whether you have complete comprehensive cover. Even if you don’t renovate your home, or increase the value of your belongings, you should still review your policy at least every three years. Before taking out a new policy, ask for advice from an insurance broker since they can advise you on whether you need to get your property valued before choosing a policy.

Even if you don’t renovate your home, or increase the value of your belongings, you should still review your policy at least every three years. Before taking out a new policy, ask for advice from an insurance broker since they can advise you on whether you need to get your property valued before choosing a policy.

What is an underinsurance clause?

No matter what policy you take out, you should always check for an underinsurance clause as this will also affect how much you pay.

In the case of partial damages where you only need a portion of the cost of rebuilding covered, an underinsurance clause in your policy can result in your insurance provider only covering part of those costs. These are generally put in place to reward policyholders with complete or comprehensive cover and to discourage people from taking out partial or incomplete insurance.

What kind of benefits does comprehensive insurance have here?

Comprehensive insurance offers peace of mind for policyholders. Even though it will mean more in insurance premiums in the short term, it means that you won’t ever be in a position where you need to cover the excess on a claim, especially at a time that might already be emotionally or financially difficult (such as in the event of a natural disaster).

If you keep up-to-date with comprehensive cover by reviewing it every few years, you will never have to worry about covering the shortfall out of your own pocket.

Get the latest home insurance news

Melbourne earthquake: Can I make a home insurance claim?
Home Insurance

Melbourne earthquake: Can I make a home insurance claim?

Melbourne and parts of Victoria have been struck by a large earthquake. Learn the key facts about making a claim on your home insurance.

Read more…
Junk insurance: Are you due a refund? (and how to claim money back)
Business Insurance

Junk insurance: Are you due a refund? (and how to claim money back)

Class actions are currently underway against CBA, Westpac, Allianz and MTA – here's how to find out if you're eligible to claim any money back.

Read more…
10 costs you don’t even know about until you buy a home
Home Loans

10 costs you don’t even know about until you buy a home

When I bought my first house, I cried, because I didn't know about stamp duty, one of many costs you don't learn about until you buy a home.

Read more…

More guides on Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site