Getting insurance for your home is very important. So important in fact, that most lenders will require you to take out a home insurance policy as part of your home loan application. It’s also incredibly important that you don’t under-insure, which can be easy to do.
You want to make sure that your home and contents are insured for a sufficient amount so that if you need to make a claim, you can be confident in your level of cover. Many people end up under-insuring their homes because they are not sure of what the true value is or they under-estimate how many possessions they have. So, let’s look at how you can reduce the risk of being underinsured, and up for extra costs, should something go wrong.
A quick guess as to the value of your possessions may fall short of their replacement value at today’s prices. As we all know, the price of goods has increased recently, and this isn’t limited to just groceries. If your furniture is several years old, you may not know how much it would cost you to replace it.
It’s also very easy to only think about ‘big’ items such as beds, TVs and fridge freezers, but what about other items that you would need to replace if your property was lost? Many people overlook items such as towels, cutlery and clothes.
Online calculators can help you take stock and value your possessions room by room so that you don’t miss anything. This process means that everyday items ordinarily forgotten about (such as linen, cutlery and books) are not missed out. It is worth bearing in mind that these calculators have been designed to ask for general characterisation of the quality of your home and contents, so you may need to consider the ‘quality’ of your items in more detail.
On top of this, some of your possessions may also be over the single item limit within your chosen insurance policy. This means that valuable items such as jewellery and artwork may need to be listed separately on your policy with their corresponding value to avoid underinsurance. You can speak to your insurer about specific items or check the Product Disclosure Statement (PDS) for more detail.
A room-by-room inventory of your home could save you a lot of time at claim time. Having an accurate list of your possessions will also give you a clear understanding of just how much you own, and if you take photos of your belongings in the inventory process, you’ll have evidence to assist your insurer at claim time.
When starting an inventory, begin with the large or expensive items in each room, and then go back to each room and work through it in more detail. Be as specific as possible where you can be, but when it comes to your kitchen or wardrobe you may find it easier to ‘group’ items. For example, your crockery could be listed as ’12-piece dinner set’ and similar items in your closet could be listed together; ‘4x women’s jeans, 10x cotton t-shirts’. This approach is sufficient unless you have particularly expensive items that should be listed separately, of course!
Home and contents insurance not only covers the cost of replacing the things inside your home but offers you protection for the building too. Buildings-only insurance is also available. So, what do you need to consider when insuring your home?
It’s important to bear in mind that your home could be damaged due to a wide range of causes. Vandalism or stormy weather may cause damage to your building that requires repairs, whereas fire or water damage may mean you need to rebuild if the worst-case scenario happens. Always read the PDS or speak with your insurer to confirm what you will be covered for.
Sometimes the cost of rebuilding a home may go up over time – and not just because the price of building materials has increased. It may be because you have added features to the home, extended it, or renovated so it’s important to let your insurer know if this applies so that your policy can be adjusted, not just at renewal time. Again, a calculator tool could help you estimate how much you should be insuring your property for, but your insurer will also be able to provide insights and guidance if you’re finding it difficult.
Depending on your property, you may also need to ensure other structures are also covered by your chosen policy. Garages, sheds, fences and in-ground swimming pools are common inclusions to think about. Other things that are important to consider, and are often over-looked and forgotten about, are the costs relating to demolition and construction. The removal of debris and earthworks can soon become expensive.
It’s very important that you review your cover every time renewal time rolls around. It may seem like a chore but getting the right level of protection for your home will pay off if you ever find yourself in the unfortunate position of having to rely on your insurance policy.
Police & Nurses Limited ABN 69 087 651 876 AFSL 240701 acts under its own AFSL and under an agreement with the issuer Insurance Australia Limited trading as CGU Insurance ABN 11 000 016 722, AFSL 227681. Any advice provided is general advice only and does not take into account your individual objectives, financial situation or needs (“your personal circumstances”). Before using this advice to decide whether to purchase a product, you should consider your personal circumstances and the relevant the Product Disclosure Statement and Target Market Determinations.
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