Is your property under- insured?

At the recent Real Estate Buyers Agents Association (REBAA) annual conference held in The Barossa Valley in South Australia, we sat through a presentation from the team at MCG Quantity Surveyors.

I found the content both surprising and alarming.  

To begin, let me ask you a question: “Have you reviewed your home insurance policies in the past year or two?”

Alas, for most people, the answer is probably “no” because it becomes one of those set and forget policies where the premium increase every year is the only thing that we consider.

But just think of how much construction costs have soared over the past two years, as well as the strong uplift in property prices more generally?

Also, do you believe that if the worst happened and your home or investment detached dwelling was destroyed by fire or flood, do you have enough insurance cover to have it rebuilt?

The truth of the matter is that 83 per cent of Australians are under-insured, according to MCG Quantity Surveyors.

This staggering statistic not only reflects those people who have failed to review their insurance coverage annually, but also those who under insured their properties to start off with.

The reason why they have done this is often because they have used a generic online calculator to determine what level of insurance that they would need to have their property reconstructed after a fire or a flood for example.

Now, I’m not here to flog insurance products – far from it – however, I believe every single homeowner and property investor needs to properly insure their assets, including ensuring that their level of coverage will enable them to rebuild or fix their properties after a disaster.

Unfortunately, it is quite common for dwellings to remain damaged after flooding because the homeowners did not have adequate insurance coverage to have them repaired.

What happens next is that they generally need to sell “as is where is” which would come at a huge financial and emotional cost to them.

Contents policies

While not to the same degree as inferior insurance coverage for detached dwellings, owners of units and townhouses must also ensure they have adequate insurance as well.

Far too often, owners within body corporate or owners corporations rely solely on the building insurance that is provided by the scheme.

Generally speaking, the body corporate is responsible for insuring common property and body corporate assets, as well as the building in which the lots are located.

However, these policies often don’t provide coverage for such things as floor coverings, light fittings, curtains, air conditioning or public liability for inside the units.

It is for these reasons that unit owners must also have their own contents insurance and every property investor must have landlord’s insurance as well regardless of the dwelling type.

It always surprises me that people will spend hundreds of thousands of dollars or millions of dollars on an asset or two and yet fail to insure them properly, when the cost of the policies are a drop in the financial ocean compared to their initial outlay and the potential capital growth.

So, if you only take one thing away from reading this today, please review your insurance policies and take the necessary steps to ensure you have adequate and appropriate coverage for your property investment assets.

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