The most common home insurance mistakes to avoid

If you have home insurance, chances are you’re feeling fairly secure that you’ll be covered if disaster strikes where you live. But according to data analysis by the Insurance Council of Australia, four out of five Australian homeowners and renters are underinsured, despite having policies in place.

In one particularly alarming example, RACV Home Insurance data revealed that 65 per cent of RACV members whose homes were destroyed in the Wye River bushfires on Christmas Day, 2015, were underinsured – some by more than $100,000.

Stacey Maher, RACV’s home insurance general manager, believes this lack of adequate coverage is largely due to householders forgetting to regularly review their policy as their home, possessions and life circumstances alter.

“You get your premium each year and you pay it,” she says. “You don’t think about what’s changed throughout the year.”

According to Maher, there are three key areas that Australians often overlook when paying their annual premium.

“The first one would be around when homeowners do renovations or home improvements,” she explains. “People tend to forget that if they’ve added an upstairs area or extended out the back, that does cost a lot of money.”

Homeowners who fail to update their home insurance policy to reflect any increases or upgrades to their property are at risk of not being adequately covered should something go wrong.

New wall and ground for a modern extension of a house
Homeowners who fail to update their policies after renovating are at risk of being underinsured. Photo: iStock

 

In rural areas and bushfire-prone regions, it’s important to check whether there have been changes in building codes and regulations, as that might increase the cost of rebuilding should the property be severely damaged. Many homes end up underinsured because owners haven’t recently reassessed their building’s value, and their insurance policy doesn’t reflect contemporary rebuild costs.

The accumulation of possessions is another factor that many people forget to take into account. It’s important to keep track of purchases made throughout each year, and to update your contents insurance to include new belongings.

“Over the year you might buy a new lounge suite, or invest in some jewellery, or buy a whole lot of clothes and shoes, or a bike,” Maher lists.

“You do tend to collect things over the year and not realise it because it might be in little increments. And it’s the mundane things that can really cost a lot. If you did have to start again and buy all new clothes, shoes, dinner plates and cutlery, those things really add up.”

The third home insurance matter that can cause headaches for Australians is not being aware of policy limits, and how much they’re insured for.

“Under general contents with RACV Home Insurance, there are certain items like jewellery and watches and works of art that are only insured to a certain amount, and that’s stated on the policy,” Maher explains. “Sometimes they can get overlooked. People might forget that they have $10,000 worth of jewellery but the policy only insures them to a certain amount.”

Vintage bike in stylish retro living room
It’s important to keep track of purchases and update your contents insurance to include new belongings. Photo: iStock

 

If items such as jewellery and watches aren’t listed in home contents insurance as ‘specified items’, then they’re only covered for up to $1000 under ‘general contents’. Ensuring these items are covered for their total value is crucial to making sure you’re protected in case of burglary or loss. Moreover, listing these possessions as ‘specified portable valuables’ also covers them for loss inside and outside the home.

Maher says these home insurance mistakes can affect homeowners and renters across the gamut of age and income, but that people who’ve held a policy for a decade or more and haven’t gone back to review it can be especially vulnerable. She suggests that everyone who holds a home and contents policy reappraise it annually in order to prevent being underinsured.

“As you get your renewal notice each year, it’s probably a good opportunity to reflect on what’s changed, in regards to the building or your contents,” she advises. “Have you made any big purchases? Think about the cost if you had to replace thefts.”

Other types of coverage worth considering within a home contents policy include optional accidental damage – handy if you have kids or pets – and optional cover for fusion of electric motors, which provides coverage in case items such as refrigerators or washing machines burn out from a surge in current.   

Visitors to the RACV website can use a home buildings calculator and a home contents calculator to get a sense of whether they’re under or over-insured, and where their policy may need updating.

“That’s often a good way to double check that you’ve got yourself covered,” says Maher. “If you feel like you’d like to talk it through with someone, we have many consultants on hand that are happy to chat. We’ve got call centre consultants on 13 RACV or we’ve got our retail stores around Victoria.”

RACV Home Insurance is issued by Insurance Manufacturers of Australia Pty Limited ABN 93 004 208 084 AFS Licence No. 227678. The information in this article is general advice only. Please consider the Product Disclosure Statement before buying. For a copy call 13 RACV (13 7228). Policy limits, conditions and exclusions apply.

 

Source: www.domain.com.au

Posted by Steve Aberline