Insurance: does your policy have you covered?

Are you insured? Of course you are, you remember paying your premium. But are you insured for enough? Will your current insurance cover everything you own if the worst happens? For 80% of Australians, the answer is ‘no’.

A recent study from Understand Insurance, an initiative of the Insurance Council of Australia, found that 80% of Australian landlords and tenants were underinsured. This doesn’t mean that they aren’t insured, or that if something happened they wouldn’t receive some kind of insurance payout. What it means is that the compensation they would receive would be unlikely to cover their losses. While sometimes the choice to underinsure is based on trying to keep the insurance premium down, other times insurers just continue paying the same premium without assessing any changes, or reading the fine print. It might seem like just one more thing that you mean to look at some day, but we’ll take you through the three main types of insurance, what they’re for, and how you can make sure you’re insured for enough.


Building Insurance

Building insurance is insurance for a property. The first thing you might not know is that building insurance isn’t based on the market value of your property, rather the cost of rebuilding the same property again if something happened to it. To have an idea of what this figure might be, you need to consider whether the building standards or requirements have changed since your property was built, as well as whether labour and equipment costs have changed, while factoring in general inflation.

This is sometimes difficult to calculate on your own; if in doubt, check your mortgage provider’s calculator (if they have one), or you can find other online building replacement calculators. If you want a more authoritative estimate, it could be well worth your while to contact a conveyancer in your area. Building insurance is probably the most important insurance to check: no one wants to be left with a mortgage and no house!


Contents Insurance

Whether you own the house you live in or not, chances are you own the stuff in the property. It’s hard to keep track of all your outgoings, but do you have a rough idea of how much money you’ve spent on things still in your house in the last year? The last five years? This isn’t just about when you bought your last television or even your laptop, this is also about items such as DVDs, household devices such as smart speakers, or even books and other collectables. Do you have an expensive bike or musical instruments tucked away in your garage? Imagine having to re-purchase all of your crockery and glassware, all of your bedding and towels, all of your clothing. Have you ever thought about how much they would cost to replace? Would your current policy pay out enough?

Even if you have factored these into consideration, are you sure that they’re covered by your policy? There are online calculators to get a rough estimate for general household contents, but it may not be that simple. Many policies have specified upper limits for certain items, particularly jewellery and DVDs, which cap how much you can claim on your general insurance. If you have a collection that’s extensive (or just expensive), it might be worth getting an estimate for specialised insurance.


Landlord Insurance

If you own properties that you rent out, you should have landlord insurance as well as building insurance. While building insurance will cover the structure itself, landlord insurance generally covers you again rent defaults (if there’s an issue with tenants), as well as malicious damage to your property. Some policies also cover theft or burglary of items that have been leased to tenants, or even some natural disasters. Because landlord insurance is often used for any combination of the scenarios above, you can’t just assume that it will cover what you want it to, so make sure you read the policies carefully and don’t just compare the premiums!


There are, of course, other insurance pitfalls, and the only way to avoid them is to do your reading regularly and carefully. Review your policy, new or old, carefully to see what it actually covers, particularly when it comes to storm, floor and fire damage. At the end of the day, your insurance is your safety net if the worst happens. Insurance should give you peace of mind — put some time into double-checking your coverage, instead of just paying the premium when it arrives.