Recently an article was posted by Nine News about the potential of underinsurance for thousands of Australian homes. Underinsurance is when there is insufficient cover / sum insured to cover the costs of rebuilding or replacing the insured item. This is a serious issue when it comes to many insurance policies, and remains problematic for home building insurance.
There are different web based online estimator calculators which claim to assist in setting a sum insured in order to limit underinsurance in the home building insurance market, but according to the information provided in the Nine News article these calculators tend to, not only, under estimate construction costs, but also do not make allowance for additional costs such as demotion, removal of debris, fees, escalation of costs and other. This means the calculators which are meant to assist in the problem of under insurance may actually be doing the opposite by giving a false sense of security in the end figure provided. The research completed for the article found one calculator produced a sum insured figure of 66% less than the complete professional valuation for a particular property. The calculator with the highest estimated sum insured was still 20% less than the professional valuation.
When setting sums insureds on an insurance policy we need to be sure that the amount we set will be sufficient to put us back into the same condition (or similar) to what we were in prior to the loss occurring. The family home is such an important asset to ensure we can rebuild similar to what we had prior to a total loss occurring. Underinsurance for home buildings leaves many families in a position of vulnerability.
There is one such provider on the market which offers a “safeguard” for home buildings sums insured when the sum insured has been set based on the calculator they provide. The information put into the calculator must be completed and accurate for the safeguard to apply. The safeguard applies if the home building is a total loss and if the costs to repair is greater than the sum insured (when the sum insured has been set based on the calculator they provide). The additional amount they will pay is up to 30% more than the building sum insured.
This is a great benefit and a peace of mind for home owners. However it does take a proactive approach by homeowners to gather complete and accurate information in order to have this safeguard apply. The benefit is available with two Steadfast home insurance providers. If you would like more information on the details of these providers and the safeguard approach they offer please contact us. A 15 minute phone call could be the difference between being underinsurance and having enough cover to rebuild your family home following a devastating total loss.