Underinsurance means the insurance available may be insufficient for the loss you face. A premium that fits the budget can still leave a gap if sums insured, item limits or policy conditions do not fit the property or business. Moneysmart explains home underinsurance.
Review the basis of the sum insured
For a home, investigate rebuilding costs rather than assuming the property’s sale price is the right number. For contents, keep an inventory and check replacement costs. Ask how demolition, professional fees, temporary accommodation and other costs are treated.
A limit is not the same as cover for every event
Check the insured events, exclusions, excesses and item sublimits. Raising the overall sum insured does not remove an exclusion. Ask the insurer to identify which part of the policy responds to the risk you have in mind.
Business changes can create gaps
New equipment, extra locations, larger contracts or changed services can alter the details given at application. Keep a record of changes and ask your broker whether the existing policy needs to be amended.
A practical review file
Keep photos, asset schedules, valuations where appropriate, policy wording and the current schedule together. Ask your insurer or broker to explain any difference between a valuation and the insured amount.
When should I review?
Use the renewal date on your policy, and review sooner after a significant change. There is no universal June renewal date for Australian businesses. Find relevant business questions in our industry insurance pages.