Interesting Article..I’m thinking about having a look at our policies again with building prices going up about 2% a month here..
Insurance is one of those things most of us don’t really think that much about, until we realize we don’t have enough.
Dave and Angie Williamson’s house burnt down in April. They thought they had enough insurance to rebuild, but they were wrong. They now have to borrow $60,000 to rebuild, and for the moment the couple and their four children are squeezed into Angie’s mother’s house.
When bushfires tore through the suburbs of Canberra in 2003, nearly 500 people lost their homes and the level of underinsurance in Australia was exposed. On average the homes lost to fire were underinsured by up to 40% of the replacement cost.
Greg Tanzer is from the Australian Securities and Investment Commission. Prompted by the Canberra fires he launched an inquiry into how much insurance Australians have, and the results are frightening.
Of the 5 million homes in Australia, one million are completely uninsured, and three point 2 million are underinsured by at least 10%, meaning if they lose their home, most families won’t be able to rebuild without borrowing more money from the banks. “The trauma of the disaster is enough without having to consider that after that trauma you won’t be able to return to your house, because you simply can’t afford it”, he said.
And as well as building insurance, most Australian’s are underinsured when it comes to contents too, as Geoff Hughes from AAMI explains. “People are trying to make sure that their premium is as low as possible and they are prejudicing their level of cover as a result of doing that”, he said.
We asked Geoff to take us through an average home, in this case — Gail and Robert Richard’s house — to point out things people often miss when they work out how much insurance they need. In the living room, it’s the little stuff people forget about like DVD’s. “When you think about it, people buy these things one at a time and it’s not hard to end up with $4,000 worth. And computers, people forget about the programs, software, and if the worst happens it’s gone”, Geoff said.
In the bedrooms, it’s also the smaller items that get left off the list. “You’ve got perfumes and cosmetics, there’s a lot of money in those. $100 a bottle which ads up. And jewellery”, Geoff said.
And Geoff says electrical goods are also ignored. “One of things that people forget about in the bedroom is the TV. For some reason it’s always overlooked”, he said.
Geoff says kids bedrooms these days are a virtual Aladdin’s cave of hi-tech high priced goods. “There’s a lot of money tied up in an average kids bedroom, and a lot of parents wouldn’t think about it because it’s come as birthday presents and Christmas presents. Again it’s gradually acquired over years and it’s a big expense when it comes to replacing it all”, he said.
In the kitchen, we tend to forget about the things in the cupboards, and the cost of replacing food that would perish in a fire. “Another thing people often forget are cookbooks. If you have a lot of these at 20 and 30 dollars each, that’s a lot of money”, he said.
Gail and Robert say they couldn’t believe what they’d left off their lists, and have since decided to use AAMI’s on-line calculator to get a better idea of the cover they need.
The other big mistake families make, is failing to factor in improvements to the home, whether it’s a new bathroom, a new kitchen , or a whole new wing. “Extensions can be beautifully done, but it’s uninsured. If it goes up in flames it’s gone forever”, Geoff said.
And of course more rooms normally means more furniture. “The carpets the curtains, the furniture, and it’s all not mentioned in your policy. And in this case the people did the work themselves and there’s ten thousand dollars worth of tool and it’s uninsured”, Geoff said.
If your insurance premiums seem high, it’s probably worth remembering the insurance companies are only partly to blame. Just like petrol, the government takes a fair whack of your insurance dollars too. “In some states, up to half of a premium can go in tax, with GST, stamp duty and fire services levies”, Geoff said.
Still, in the end, the premiums are a small price to pay, when you consider how much we all have to lose, and Geoff says you can get extra cover without paying more, as long as you’re willing to invest the time.
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