Underinsurance occurs when a person’s home or belongings are insured for an amount that is below replacement cost. Consider this example: a person’s home is insured for $300,000 and they have a $10,000 premium excess on their policy. Their home is completely destroyed by a fire and they have to rebuild, only to discover that the rebuilding costs are higher than they had anticipated—$400,000, instead of the $300,000 they had been insured for. This means that plus the $10,000 premium excess, they could be out of pocket $110,000. Many people don’t have this kind of money on hand so they could be in big trouble unless they try to avoid this situation altogether. But how do you do that? To help you avoid this from happening to you, it’s best to be informed about underinsurance. This is why we thought it would be useful to put together a brief article on this subject. If this is something that you’re interested in learning more about, read on for a list of tips that will help you avoid underinsurance.
Have a Good Understanding of Your Insurance Policy
To make sure you’re covered, read your home insurance policy from start to finish. Make sure to be thorough when examining the product disclosure statement so you have a good understanding of what your policy covers and doesn’t cover. Now, we understand that you may not have a good understanding of how everything works. Luckily, you don’t have to go at it alone. Don’t be shy about contacting the insurance company if there are any policies you cannot understand.
Make Sure to Keep Your Cover Up to Date
If you’ve been with the same insurance provider for a few years, make sure your policy is still up to date. If the value of your home has gone up since you signed up for the policy, it might be worth looking into increasing it. Or if you have built an extension, renovated the exterior, or even just acquired new furniture, you might need to consider whether you need a new, more expensive policy. You may want to review your cover and add optional extras on top of it if necessary. For instance, maybe the area where you are living wasn’t a flood zone before, but now it is. In this case, you can add flood coverage to your policy. Or you may even find that the policy you have doesn’t cut protect you sufficiently, in which case you can review the various home and contents insurance plans available.
Ensure Not to Undervalue Your Home
It’s crucial that your home isn’t undervalued. There are a number of online calculators you can use to get an estimate of how much your home is worth. Although these calculators can only give an estimate, they’re probably the best resource you have. If you want an even more accurate estimate, ask your state or territory’s home value assessment expert for help. This shouldn’t be too difficult as a quick internet search will bring up home value assessment experts in your area.
New Wave Insurance works with several insurance providers to bring you the best possible solutions. We are one of Gold Coast’s premier insurance brokers helping individuals find the right insurance vehicle for them. If you’re looking for insurance brokers, our team is ready to assist you. Contact us today to book a free 15-minute consultation!