As an Insurance Broker, we can review options and recommend policies for you based on what you tell us about what you’re insuring. But we will never know the ins and outs of your belongings, property and circumstances like you do. This is the case whether you’re looking at personal insurance or business insurance.
It’s important to get a good estimate of your rebuild and/or contents replacement costs (sum insured) when you first set up your policies, review these amounts regularly, and update them with us/your insurer whenever needed.
“Sum Insured: The financial limit an insurance company will pay the policy holder in the event of a covered loss. It’s important to remember that a property’s sum insured is not what you paid for, or the market value of the property, but what it would cost to re-build. If you underestimate this amount, you may have to cover the difference between what your insurance covers and the actual costs.”
Over the past few years, we have seen significant increases in building costs due to factors such as inflation, natural disasters and the Covid-19 pandemic. These increases are having a flow-on effect both on the premiums for building insurance (personal and business) and the real costs of rebuilding a property.
Even if you don’t own your property, it is very common for people to underestimate the cost of replacing their contents or to forget to adjust their sum insured after purchases (or even after selling large items and downsizing).
Some people also choose to underinsure their properties, assuming it’s likely if they have to make a claim it will only be for a partial claim, not a total loss, to reduce the premiums they pay each year. However, if an insurance company believes you’ve underinsured your property (deliberately or accidentally), they can pay out a partial loss claim relative to how much the property is underinsured. For example, if you have only insured your property at 75% of the rebuild value, and you need to make a $60,000 claim to rebuild part of the property, the insurer may only pay out $45,000 (75% of the cost).
These days, most insurance companies have a tool on their website that helps you calculate an estimate for your building and/or contents insurance. Alternatively, the Insurance Council of Australia has calculators available: https://insurancecouncil.com.au/consumers/calculators/
We recommend using these calculators as a starting point to get a figure for your insurance. However, it’s important to remember these calculators are an approximate guide only and you should do a sanity check of the details to make sure they seem correct or adjust the figure as needed.
We also recommend:
Create a digital inventory of your contents, and precious belongings and update these as you make new purchases or remove items. For example, if you get a new oven, are gifted new jewellery or get a new TV. We recommend storing the inventory along with receipts and photos/videos of rooms in the cloud so they can be accessed in case your computer or paper files are destroyed
Check with your insurance broker or insurance company about what they consider high-value items that should be listed specifically. This may include specific items of jewellery or IT equipment above a certain value, art, collectibles etc. You may want to consider getting a professional appraisal of high-value items to ensure you have the right level of cover for them. Keep these appraisals in your digital inventory.
Factoring in any renovations or improvements into your sum insured and updating your policy when these occur, not just waiting for your renewal.
Consider chatting to a local builder to get more detailed information about rebuild costs in your area/for your property. This can also be important to stay across local building regulations. Regulations are often reviewed and sometimes updated after a natural disaster, so the costs and materials needed to rebuild to the same standard may be quite different.
Alternatively, you can use a professional valuer or surveyor for a formal value report.
Ensure you include additional structures like pergolas, garages and sheds and check whether your policy includes demolition and removal of debris.
If you are ever faced with the unfortunate experience of having to rebuild or replace your contents, the last thing you want is the added stress and financial pressure of realising you didn’t have enough cover. We hope these tips can help you ensure you have the cover you need, so you can relax with the peace of mind that you have some financial security in case of the unexpected.
If you would like to chat with us in more detail about your specific circumstances, property or belongings we would love to hear from you.
