Insurance routine provides peace of mind
17 January 2014
Reviewing your home insurance isn’t normally high on the to-do list, but getting into the routine of evaluating your cover at the beginning of each New Year is a smart habit to adopt.
While it’s undoubtedly easier to continue with your existing cover each time the renewal notice appears in your mailbox, it’s important to consider how much your insurance needs have changed on a regular basis and modify the policy as necessary.
When you take out a home loan, all lenders require you to take an appropriate level of insurance for the house, and the expectation is that you’ll review and maintain this cover at consistent intervals. Not having your house insured is a breach of the terms and conditions of your mortgage.
The longer you’ve lived in a house, the more likely it is that your insurance needs have changed.
You may have made improvements or modifications to your home such as adding a swimming pool or renovating the kitchen, which would have increased the value of the home significantly since signing the original insurance policy.
It’s a good idea to get a professional appraisal to revalue your home and update your insurance policy accordingly.
‘The Understand Insurance Research Report’ produced by the Insurance Council of Australia (ICA) shows that many Australians are unsure about what type of damage is covered in their building insurance, so it’s important to understand the specific inclusions and exclusions of your policy, as some hazards may not be covered.
Adding in an allowance for demolition and clearance of the site is also an option. In the event the house is destroyed and needs to be re-built, these costs would be deducted from any insurance payout, so it is particularly important to consider that.
If buying a house is on the cards this year, ensure you take out insurance for the property as soon as you sign the contract – this will cover you should something happen during the settlement period.
Talk to your lender about insurance when arranging finance for your home loan, as they will be able to recommend some options.
As with home and contents insurance, be sure to update your contents policy to include all of your Christmas gifts and Boxing Day sale purchases as well. The ICA study also found that a third of Australians risk underinsurance by not updating their contents policy to cover new possessions.
To avoid this, compile an inventory of your home’s contents. Go from room to room and make a list of all your valuables and their replacement value. This list is not only important if you need to make a claim but it will also help the Police with the recovery of items if your house is burgled.
Don’t forget to include any special items, such as jewellery you have inherited, art or other valuable collections. You may need to add these to your policy as additional cover.
Be aware that policies differ markedly in regard to insuring special items, so be sure to check your level of coverage carefully.
So take the time to review your insurance policy annually. Think of it as an investment in your future security and wellbeing rather than a cost.
Most importantly though read and understand the policy, the inclusions, the exclusions and the excess limit. Remember no insurance is not an option, so find a policy that best suits your needs and your budget.