What you need to know about building and contents insurance
RACV’s head of home insurance Zoe Malempre says many things can damage your buildings, including natural disasters such as bushfires and storms. While your contents are at risk from similar dangers, there is also the risk of burglary and vandalism.
Yet when the worst happens, many people find that they are underinsured, in other words they do not have sufficient insurance to cover the cost of rebuilding and replacing their home and possessions to the same standard.
According to the Insurance Council of Australia, four out of five Australian home owners don’t have enough insurance to cover the true value of their home and contents should disaster strike. And two out of three renters have no insurance at all to cover their contents.
“From talking to RACV members we believe two key reasons for underinsurance is that many forget to appropriately insure items around their home, and they also forget to update their insured values to reflect today’s full replacement values,” says Malempre.
So how can householders make sure their insurance cover accurately reflects the true value of their house and all the things inside it that make it a home?
Understand the difference between your building and contents
There are two types of insurance to consider when thinking about protecting your home and belongings: building insurance and contents insurance. Insurance Council spokeswoman Lisa Kable has a simple trick to visualise the difference between home and contents insurance.
“Imagine you could pick up your house, flip it upside down and shake it,” she says. “What falls out is the contents and what is in your hand is the building or home.”
Use a calculator
A simple way toestimate what it might cost to rebuild or repair your home in the event of a disaster or damage is to use RACV’s home building calculator*, which takes into account factors such as when your home was built and to what standard.
Zoe says what you think it might cost to rebuild or repair a house and the actual cost are often miles apart. For example, a replacement build must meet the latest building codes including higher standards for energy efficiency. “The costs can add up,” she says.
It’s also important to remember to include outbuildings such as garages and carports or garden landscaping and pools.
It’s also important to consider interior finishes. Are your bathroom tiles lavish marble or basic ceramic?
The RACV building insurance calculator takes into account the number of rooms, ceiling heights and whether the house is single or multi-storey. The bigger the house, the more it costs to rebuild.