Buying a property (or portfolio of properties) is quite often the biggest investment you’ll make.
The natural disasters our country has faced in recent weeks highlights the importance of protecting your investment with adequate insurance cover.
With this in mind, it was worrying to note in a recent survey conducted by GIO and Reed Construction Data, the number of property owners around the country that are putting their investments at risk by not insuring – or under-insuring – their properties.
According to the survey, an estimated 70% of Australians have insufficient house and contents insurance. The problem is particularly prevalent in Western Australia, South Australia and Queensland.
The survey found Australian homes are under-insured by 20% on average, which means a shortfall of $100,000 on a $500,000 home.
Larger homes, homes built between 1914 and 1949, multi-level properties, those built on steeper land and those built of weatherboard are the most likely to lack the right levels of cover.
So why are we under-insuring? The reality is that many of us are underestimating the cost of repairing or rebuilding our homes and the value of our home contents.
Construction costs have risen sharply over the last decade, particularly in northern Australia where the resources boom is fuelling investment and cyclones are common.
We’re also failing to update our policies following an asset upgrade such as a renovation or the purchase of high value items for the home.
Plus if you rent your property out, you’ll want to consider rental insurance. It’s believed that only a very small proportion of investment properties have some form of rental cover to protect owners against malicious damage to the property, as well as loss of rent.
A bad tenant can cause thousands of dollars damage to a property and may owe several thousand dollars in rent before they can be evicted.
You can find out if you have the right level of cover for your home building and home contents – one of the easiest ways to do this is to use one of the online tools provided by insurers.
Yes, you may find you need to pay more. But if you ask those affected by the floods in Queensland or the bushfires in Victoria, I think they would say it’s worth it.
The Insurance Council of Australia has produced a useful leaflet highlighting tips on how to avoid under-insurance which can be downloaded here
By Ryan Crawford