Tuesday, November 26, 2013

EBM INSURANCE 10 Tips for Avoiding Under Insurance

EBM’s 10 tips for avoiding underinsurance

For investors and homeowners alike, insurance can provide cover for losses and damage due to unforseen events, however, insurance can be worthless if you don’t insure for an adequate amount.
In light of this, we would like to share an article from this month’s Property Investor smartbook, detailing EBM insurance broker’s 10 tips for avoiding underinsurance.
Even the best insurance policies can leave property investors exposed if they don’t insure for an adequate amount. The General Manager of RentCover landlord insurance, Sharon Fox-Slater, describes underinsurance as “rife” in Australia’s property market.
“Study after study shows that Australians tend to underinsure. Every time there’s a major disaster, such as the recent New South Wales bushfires, we hear about more cases,” said Ms Fox-Slater.
“If you insure an investment property for $200,000 and the actual rebuild costs $400,000, you risk being caught severely short.
“Most investors don’t deliberately underinsure but it’s not easy to accurately estimate the costs of rebuilding.
“It’s often more expensive to start again than to build from scratch because there’s demolition to consider, and construction costs rise over time.”
Ms Fox-Slater offers the following tips to avoid being underinsured:
- The most accurate method of estimating rebuilding costs is to approach a quantity surveyor for a written replacement cost estimate – other professionals who can help include architects and builders.
- If you use online calculators, choose ones which ask detailed questions, such as whether your home is on a slope. Compare the answers from at least three, then add a margin for safety – and ask a builder for an opinion on the final figure you come up with.
- Increase your sum insured every year to keep up with construction costs. According to the Australian Bureau of Statistics, the cost of building a new home raised an average of 7.7 per cent each year in the decade to 2008. 
- Remember to include supplementary costs associated with rebuilding, such as demolition, professional fees, council fees, gardening costs, and the cost of meeting modern building standards.
- Keep the big picture in mind – deliberately underinsuring your property might save you a few hundred dollars in premium, but lose you tens or hundreds of thousands of dollars if you need to claim.
- Do your homework and try to avoid becoming one of the many people who only read their policy document after a loss.
- Shop around when renewing your insurance but remember to look for “value” and features not just the cheapest price.
- If you’re not in a strong enough financial position to cope without rent for six months to a year or more without rent while a rebuild occurs, take out landlord insurance.
- Keep your sums insured up to date, accounting for improvements, renovations and new possessions you acquire.
- Take photos of your investment property to help you remember what fixtures and fittings are in place should you need to claim.

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