Interesting. I’ll have to look into that. I certainly cannot afford to insure the property for its full value so it may be pointless insuring it at all.
If you under insure you are likely to find yourself scratching your head if you need to claim for a total loss situation.
After the huge bushfires around Sydney in 1994 quite a few people were very disappointed with their home policies.
While not much of an issue for less than total loss claims, those who lost their homes werent happy.
Just as example numbers.
Policy holder insures their building for $100k, and their contents for $10k.
They lose the lot in a fire.
Insurance assessor comes along to inspect the remains.
The assessor determines that to replace the house will cost $200k, and based on the number of rooms etc, and other indicators, determines that the contents were worth $20k.
The policy holder got a payout of $55k.
The reasoning was that because they under insured by half, the payout would only be half of the policy value.
There was a bit of a stink about it in the media at the time, but the insurers countered by saying the conditions were in their policy statements.
In that example, nobody lost out though.
The public donated enough money and it was administered properly, and everyone got covered whether they were under insured or even not insured.
Ive over insured my house.
Luckily I am not in a high premium area, and the difference in premiums wasnt huge for the extra cover.
But, I will shop around shortly as I need to change my policy with the addition of the shed and other stuff.
Wont likely affect the value of improvements, but will likely increase the contents side of things.
The basic premise of insurance companies is that when they accept your policy, they are betting you wont make a claim.
Exactly the same way places like the TAB work with their business model.
The difference between insurers and the TAB is that the TAB wont change the rules half way through the race.
Cheers
Rob
