Is your home underinsured?

When was the last time you updated your home insurance? Although it can be easy to set and forget, ensuring you’re adequately covered is vital.

Home insurance is designed to protect you against things like the costs of repairing your home or replacing your valuable possessions in the event of the unexpected – like theft, fire, flood, or storm.

How much you’re insured for is based on your estimate of how much your contents or house would cost to be replaced or rebuilt at the time the policy is written. That total is known as your ‘sum insured’.

But when you buy new contents or make renovations to your home that sum insured can change. 

Insurance is somewhat a protection blanket. Of course, it doesn’t stop accidents from happening – like preventing robbers from breaking into your home and stealing your belongings – but it sure does provide you with peace of mind if the unfortunate were to happen. At the end of the day, the purpose of insurance is to provide a level of financial protection.

But according to the Insurance Council of Australia (ICA), many Australians don’t have an adequate amount of cover in their policies to provide the support they may need if they need to make a claim.

In fact, a survey conducted for the ICA found that 83 per cent of households believe when it comes to home and contents insurance, they may be underinsured. 

Often that’s because people 'set and forget' about their home insurance year after year fail to factor in new additions to the home or that the costs of replacements have risen.

There’s lots of reasons why home insurance should be updated every year:

• Additional contents are added to your home.

• The price of building materials and the cost of labour go up.

• New building codes can dramatically affect the costs of repairs and rebuilding, especially if you live in an area prone to bush fires or floods.

• If you renovate or add things like a swimming pool, a second level or other extensions to your home.

While having some home insurance for small events is better than having none, if you’re underinsured and need to replace your contents or carry out a major rebuild, it could be financially straining.

Having to rebuild your home or replace your contents is bad enough without the added burden of realising your insurance doesn’t cover it all.

To help give you greater peace of mind, here are some tips on how to make sure you’re fully protected:

1. If you’re thinking of getting a sum insured policy, make sure you’ve got an accurate estimate of your home and contents total worth. The NRMA home buildings calculator can help you by taking into consideration a range of factors that influence the value of your home.

2. You can also get a second opinion on your sum insured estimate. Seek out an independent quantity surveyor or valuer with a good reputation.

3. For extra peace of mind, consider adding optional extras that cover things like accidental damage and vet costs for injured pets; or really put yourself at ease with NRMA’s Home Plus Insurance, which provides benefits like a 25% safety net on top of your sum insured.

4. NRMA Contents Insurance helps protect your major household items or personal belongings if they’re stolen or damaged in a covered event. Just as with home insurance though, it’s important you make a correct estimate of the value of your belongings using the NRMA Home Contents Calculator. All homeowners across Australia (QLD, WA, SA, NT, ACT, NSW, TAS) can use this calculator.

5. The most important tip of all: if you renovate your home, purchase new furniture or appliances, or just want to make sure your home and contents are always insured for what they’re worth, review your insurance estimates yearly, do the math and adjust the amount you’re covered for accordingly. Then relax knowing that even if the worst happens, you have helpful insurance you can rely on.

This content is intended to be general in nature and is not financial or professional advice. We recommend you obtain independent professional advice relevant to your circumstances, before making any financial or commercial decisions.