Top 5 Mistakes when Insuring a Home
When arranging home insurance customers will often email or phone for advice. We have complied the top 5 mistakes that we often hear.
1. Reducing the sum insured to save money
Customers often think that to save money they should reduce the sum insured. They often justify this by concluding that the odds are they will never have a total loss – right? But what if you do? Would you be happy if you ran out of money rebuilding your house? Insurance is about putting you back into the the position you were in prior to the loss and it is about saving you from financial ruin. When you are calculating your sum insured it is the big losses that you want to be adequately insured for. If you want to save money, consider increasing your excess.
2. Not considering the correct sum insured
Often customers believe that we know how much it will cost to replace their home. The reality is we are not valuers or quantity surveyors; we don’t know your home – we have never even seen it, and quite simply we don’t ask enough questions for the computer to be able to calculate it. The sum insured that is generated when you get a quote from initio is based on $2,000 a sqm, some houses will cost a lot more than this, and the sum insured should be increased. One tool that you can use to calculate your sum insured is an Online Calculator. Other options include engaging a valuer or quantity surveyor, or having a chat with your builder. There is more to consider than just the cost to rebuild, you also have to allow for demolition costs and inflation, check out our previous article for more details on this.
3. Not choosing the right excess
We have customers who admit that they don’t claim for small losses, or losses that can repair themselves, yet they have a $400 excess. If this is you, we recommend taking a higher excess. Opting to take a $650, $1,000, or $2,000 excess means that you will save premium. If you wouldn’t bother claiming for anything less than $1,000; why would you waste your money insuring it?
4. Choosing the cheapest / dearest policy
Cheap doesn’t equal good. Your insurance is protecting your most valuable asset, so you need to make sure it will do a good job. You also need to make sure that have the right cover – if the property is tenanted, an owner occupied policy might not pay out if you have a claim. You also might find that it doesn’t cover you for damage caused by tenants.
By the same token the most expensive policy doesn’t necessarily have the best coverage. Sometimes you could be paying extra for a brand name and the advertising associated with it. Or you could be paying extra to a middleman who is clipping the ticket. Or you could be paying for coverage your don’t need – do you really need replacement contents cover in your rental? and do you really require loss of rent from abandonment when your bond would cover this?
5. Thinking that insurance should cover everything
There are some losses that are not covered by insurance. Some of these are uninsurable, like leaky houses and acts of terrorism. Others might require an additional policy, such as contract works policy if you are doing renovation work. Things like wear and tear are not covered – the loss needs to be caused by a sudden and accidental event. Consider that if you insurance policy covered your for every possible loss, the annual cost would be tens of thousands of dollars.
Insurance is needs to work for you, so make sure you consider what risk you want covered, and what risks you a comfortable self insuring. Initio offers insurance solutions that can be customised to suit your own home, holiday home, rental or your own home/holiday home that is rented out.