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What is underinsurance and how can I avoid it?
Underinsurance happens when you don’t have enough insurance to cover the loss to assets, like your home and contents, after events such as fire and theft.
Some people find themselves underinsured for many reasons. It can create financial and emotional stresses on families and individuals. However, there are plenty of things you can do to avoid underinsurance, so you’ve got the right level of insurance cover to suit your needs.
Tips on how to avoid underinsurance
Some Australians get caught without adequate protection to fully cover their assets. To ensure this doesn’t happen, here are few tips to avoid underinsuring your property and belongings.
1. Research your policy and make sure it’s up to date
Read your policy documents to know what exactly is and isn’t covered, and under what circumstances a claim is paid out.
Do you want cover for specific household items, such as wheelchairs or surfboards? Or perhaps you want to know what the maximum cover is for a particular item. You can check on all the important things in the Product Disclosure Statement (PDS).
2. Consider your insurance options when renovating your home and add any big purchases to your policy
Have you renovated or purchased any big ticket items lately? Update your policy to include new items like electronics and appliances. Also, it’s a good idea to ensure that your insurer knows about any additional work done, so that your existing policy covers your home. This is important because it may affect your premium and excess amount if the value of your property changes.
However, there are restrictions on cover for any building extensions, alterations or renovations to your home, which include any damages caused by the building work. So you’ll need to contact AAMI before you commence building or renovations.
3. Value your home and contents accurately
Everyone has different needs when it comes to home and contents insurance so it may be difficult to correctly assess the value of your home and contents. We get it. It’s not easy to keep on top of things. But if your home and contents aren’t valued accurately, underinsurance may lower your chances of recovery in the event of a loss.
The cost of replacing your home and contents may be more than you think. You can get an estimate of the sum insured you need for your contents insurance through AAMI’s home contents calculator.
4. Combine your policies to save
When you combine your home and contents insurance it’s easy to save on your overall premium. With AAMI, get up to 10% off when you buy home and contents insurance together*. There are optional extras for high value items such as jewellery, art and antiques. And if you’re worried about losing your contents outside of your home, AAMI offers optional portable items cover for handbags, jewellery, portable electronic items and more. You can also specify items to cover their full value under extra cover, including for laptops, mobile phones, electronic tablets and more.
* Discount does not apply to any extra premium for portable valuables cover.
Ensure you have the right level of cover
Knowing if you have the right level of cover isn’t easy. But there are a couple ways you can check. Speak to a licensed builder or professional valuer to determine your home’s worth, or alternatively you can get an estimate through the sum insured home contents calculator.