Life Insurance

Half of Australians Don’t Have Adequate Home Insurance (What You Can Do About It)

28 Feb 2020

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Home insurance can secure your household against any accident, but only if you have proper coverage.

Your home is your most important investment, so you should secure it accordingly.

Unfortunately, this is not always the case in Australia. Most Australians either have basic home insurance or none at all.

Only half of insured Australians have coverage for all possible types of damage. If a natural disaster hits, you may experience an unpleasant surprise.

Your home insurance may not cover the damage.

The Core of the Problem

Many believe that inadequate home insurance stems from a lack of funds. Home insurance isn’t exactly cheap. People assume that lower-income individuals choose to take their chances.

But a recent study in Australia disproved this theory. It appears that housing status plays a far greater role than the economy.

Risks of Inadequate Home Insurance

Natural disasters are not uncommon in Australia. The risks of flooding, fires, and cyclones are real every year. Despite that, most Australians only go with a standard home insurance policy.

The basic policy covers personal property in the event of theft and vandalism. It also covers minor environmental damage, but even some extended coverage can exclude major disasters like earthquakes and flooding.

Homeowners who only have basic home insurance coverage face the same issues. The insurance won’t cover property damage in the event of natural disasters.

Those who don’t have home insurance are in the toughest spot. An accident can leave them without possessions or property. Without coverage, they’d need to start from scratch.

But there’s a way to prevent this. Below are 5 tips for getting the best home insurance available.

Tip #1 – Be Wary of Natural Disasters

The Hobart floods are just one of many examples of natural disasters in Australia. Cyclones, bushfires, and floods are frequent in various parts of the country.

In recent years, bushfires have been notorious along south-western Australia. The end of 2019 brought the disastrous “megafire” near Sydney. Flood threats are also increasing near the coasts of Queensland and New South Wales.

All these factors are reflected in a hike in insurance prices in recent years. Moreover, some areas are now “insurance-proof”. Those who don’t get insured on time in high-risk areas may miss out pretty soon.

So, make sure your insurance policy includes protection against these threats.

Tip #2 – Secure Outdoor Properties

Your house is your primary asset. But valuable things and structures around it need insurance cover too.

A standard insurance policy may not include these outdoor assets, like fencing or an outdoor kitchen. Ensure that all these outdoor elements are part of your home insurance policy.

For minor items, you can consider content insurance. This additional coverage includes outdoor items within your property.

If you care for your BBQ or picnic table, make sure you’ve got it covered by your insurance policy.

Tip #3 – Consider the Rebuilding Value

Standard home insurance covers the costs of repairing property damage. Naturally, they are lower than the market value of an entire house.

However, a major disaster can destroy your home. Keep this in mind: the market value of a house is not the same as the rebuilding value.

Rebuilding costs include new materials and labour. But it also covers professional fees and more. Talk to a builder and estimate the rebuilding value of your home. Use that value when you create a policy.

Otherwise, you remain underinsured.

Tip #4 – Re-evaluate Your Home

When you take out a home insurance policy you are including variable factors, like the fact that the house that you insure today may completely change in three years’ time.

Every time you alter something in your home, it will change the value.

Have you added another room? Or installed a huge swimming pool? Maybe added underfloor heating?

All of these require a change in the insurance policy.

Tip #5 – Be Ready for Additional Expenses

Some accidents only cause minor damage. But they frequently come with extra expenses.

For example, debris removal insurance is an additional policy. It covers the clean-up costs that occur after property damage.

Likewise, demolition insurance covers the cost of demolishing a beyond-repair structure. Sometimes it’s just a part of the structure that’s caught in an accident. Other times it’s the entire building.

Other expenses can prove costly, too. Especially professional fees, such as business interruption or architectural costs.

Consult the Best in the Business

The worst way to find out about these expenses is in the aftermath of a disaster.

Before you create a policy, you should inform yourself about these hypothetical situations. Your policy will depend on your location and the possible hazards.

Of course, your home insurance isn’t the only thing that you have to worry about. You also have to consider life insurance. After all, if something happens to you, your family may struggle to maintain the home that you’ve insured in the first place.