Is Your Property Covered?

ISSUE 130 - APRIL 2016

In this issue

INSURANCE ARE YOU COVERED?

While most Australians recognise the need for property insurance, a recent national survey shows that a high percentage are underinsured, almost 13% of people have no insurance and many are not appropriately insured i.e. their insurance product does not cover what they expect it to. 

Different insurance policies for home and contents and for properties that are rented and those that are owner-occupied makes choosing a policy confusing, as does the fact that some banks include insurance within mortgage repayments.  So if it comes to the crunch and you need to make a claim, will your insurance policy pay up?

Are You Insured for Enough?

The Insurance Council of Australia has estimated that more than 40% of households fail to correctly assess the value of their home and contents and so are underinsured.  In particular, building costs and standards change so the cost of rebuilding increases every year – so the insurance value to rebuild a property damaged or destroyed by fire needs to be continually updated.  When assessing how much your insurance should be, it’s also important to go through every room and make sure your policy is sufficient to replace the contents of your home, should it be lost in a fire or flood.  The Insurance Council of Australia provides home and contents calculators as a general guide to work out how much cover you may need at:

https://understandinsurance.com.au/calculators  or most insurance providers also now include a calculator on their website.

Read the Small Print

Do you know what your insurance policy covers? In particular, does it cover floods, storms or bushfire damage?  The Insurance Council of Australia’s Effective Disclosure Taskforce found that insurance policy Product Disclosure statements are so focussed on complying with financial regulations and limiting an insurer’s liability and have become so long and complicated that many consumers simply skim them and then file them away until they need to make a claim.  And it’s at this point that they find they don’t have the cover they expected.  The Taskforce has been working with the industry to better allign policy information with customers needs – making it clearer, simpler and more effective – but it still comes down to the policyholder reading the small print. 

Are You Renting Your Property?

Landlords and those renting out property on a short-term basis (e.g. AirBnB) need to take out an appropriate policy or recheck their current policy to ensure they are covered.  On the whole, insurance policies for home owners will not cover damage caused by tenants, and may actually be void if a property is rented out when a problem occurs (even if it is not caused by the tenant). 

There are a number of specific landlord insurance policies on the market, which provide cover for accidental or malicious damage by tenants and loss of rental income – and the cost is tax deductible on investment properties.  Forsyth recommends all our landlords have landlord insurance.  However, even for landlord-specific policies, it’s important to read the small print to ensure that contents such as kitchen equipment, carpets and curtains, as well as the building fabric is included in the cover.  Tenants need to also take out their own contents insurance. 

Those property owners who are renting out a property on a short term basis need to be particularly vigilant in checking they are covered when they are living in the property and when it is rented out.  If you are not covered when renting, your current insurance policy may be void and you might also be liable for many thousands of dollars in claims if a ‘guest’ is injured when renting your property.

AirBnB offers the Host Guarantee that “tops up” your home and contents insurance up to $1M, or check out a number of new products which specifically cater to this market, such as ShareCover from IAG.

How Much Will it Cost?

The cost of your cover will depend on the amount being insured, where the property is located, and how much excess you are willing to pay.  You can shop around insurance company websites to look for the best deal, or look at a comparison website such as Canstar, which rates different companies and policies for home, contents, landlord insurance etc, as well as providing some useful tips and information. Reports are available at: https://www.canstar.com.au/home-insurance/ and https://www.canstar.com.au/star-rating-reports/landlord-insurance/.

When you are considering the amount of cover you need for either your home or investment property, it may be helpful to have an up-to-date estimate of the market value of the property and its market rental.  Forsyth’s Sales and Property Management Teams are always happy to provide you with a market assessment so you can ensure your insurance cover is in line with the capital value and income yield of your property.

SUMMARY

• Check you have enough insurance to rebuild and replace contents at: https://understandinsurance.com.au/calculators.
• If you are renting out your property, check you have the right insurance policy and compare costs at: https://www.canstar.com.au/.