How to tell if you’re adequately insured

senior couple in their kitchen


Posted January 17, 2024

Underinsuring your home might be one of the biggest and costliest mistakes someone could make. Here's how to help avoid underinsuring your home and contents. 

The worst time to find out you're underinsured is when you need to make a claim under your cover unexpectedly - like a tree falling through your roof, or a treasured item getting stolen. 

Underinsurance is when the nominated sum insured amount on your policy is too low to help cover the replacement value of your home and contents.

While the task of painstakingly going through the entire contents of your house and calculating what it would cost to replace – from your saucepans and office equipment to your designer shoes and TV unit – can be laborious, it may be a process that helps should an insured event, such as fire, theft or storm, occur. 

Underinsurance explained

Why you might be underinsured

According to the Insurance Council of Australia, 23 per cent Australian homeowners - or 1.8 million households - don’t have enough insurance to cover the true value of their home and contents should disaster strike.  When something unexpected happens, such as a natural disaster or burglary, unfortunately, many people find that they fall into this category and are underinsured.

In other words, they do not have sufficient insurance to help cover the cost of rebuilding and replacing their home and possessions to the same standard.

RACV Head of Home & Business Insurance Kirsty Hayes says there are a few main causes as to why people may be underinsured. 

“From talking to RACV Members, we believe two key reasons for underinsurance are that many forget to appropriately insure items around their home, and they also forget to update their insured values to reflect today’s replacement values,” she says.

So how can householders help make sure their insurance accurately covers the true value of their home and all the valuables inside?

RACV solar

Check that add-ons like sprinkers, solar and disability access installations can be added to your policy. Image: Supplied


How to avoid being underinsured

Use a calculator

A simple way to estimate what it might cost to rebuild or repair your home in the event of a disaster or damage is to use the RACV Home Buildings Calculator,^  which takes into account factors such as when your home was built, and to what standard.

The calculator also includes the cost to demolish and remove debris, which should be included in the sum insured. 

“The costs can add up,” Hayes says, noting that an individual’s estimated repair or rebuilding costs can significantly differ from the actual amount required.

For example, a replacement build must meet the latest building codes, including higher standards for energy efficiency, while an allowance should also be taken for services such as architects or engineers if required, and other expenses that are part of the home, such as disabled access, sprinklers, solar panels, and ongoing inflation for building costs.

It’s also important to include home features such as garages and carports or garden landscaping and pools, as well as interior finishes including bathroom tiles or marble benchtops.

The RACV Home Buildings Calculator^ also accounts for factors like the number of rooms and whether the house is single or multi-storey. 

Generally speaking, the bigger the house, the more it may cost to rebuild.

Understand your property zoning

Changes in building codes and planning zones, especially following a natural disaster, can significantly increase the cost of rebuilding or repairing a house, with the result that people end up with insufficient insurance. 

A quick search on, an online portal which has detailed information on properties across Victoria and New South Wales, will reveal zoning information about your particular property, such as whether it is in a bushfire zone, and therefore subject to stringent – and potentially more expensive – building codes.

Take stock of your belongings – current market value and quality

Regardless of whether you are a homeowner, landlord or renter, an accurate assessment of the value of all contents in your home is important when calculating the cover required to avoid being underinsured. 

Hayes says you really do need to spend time adding up everything, from your jewellery collection to your wardrobe contents.

Using a household inventory checklist, set aside some time to walk through every room in your house, and research what each item would cost to replace. 

When doing your audit, don’t forget to consider the standard of your contents, such as heirloom jewellery, luxury watches and leather couches, as this may impact the amount of insurance cover you require.

The RACV Home Contents Calculator can also help you make an assessment on the value of your contents. You will still have to note big-ticket items, but the calculator makes estimates based on such things as the number of occupants, and the size of the house.

The RACV Home Contents Calculator also takes into account the number of bedrooms, living areas, bathrooms and other rooms as an indication of the size of the home, as well as the extent of furniture in each room.

Again, the bigger the house and the more contents you have, the more likely you will have a higher value of contents to insure.



lounge room

Furniture, artworks, lighting fixtures and ornaments should all be factored in to your contents audit in your home. Image: Getty

Things to remember when estimating your contents insurance*


List individual jewellery items and other valuables 

Depending on your home insurance policy, there may be standard limits on valuable items such as jewellery, art and watches. You may need to specifically list these. 

Consider accidental damage

Accidents happen. Optional accidental damage cover can be added on some policies, and may insure for accidental incidents.

Cover for items outside the home 

For devices such as laptops and smartphones that are often also used outside of the home, you can consider optional add-ons to your policy. 

Remember sports gear 

Bicycles, golf clubs and other items may be costly to replace, so it might be worth checking if your policy covers these types of items. 

Check the wardrobe

Clothes, shoes, and accessories in your wardrobe may be worth more than you think. Consider doing an audit of your wardrobe to ascertain the total worth of your closet that could be added to your policy.

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*Terms, conditions, exclusions and limits apply

^The RACV Home Buildings Calculator provides an indication of rebuilding costs only and in no way guarantees the amount RACV Insurance may agree to insure your home for. It is your responsibility to check that this amount is enough to cover the rebuilding costs of your home at today’s prices. Before you decide whether to buy or continue to hold RACV Home Insurance, you should calculate the actual replacement value of your home and consider the information in the Product Disclosure Statement

The information provided is general advice only that does not take into account your personal circumstances. Before making any decisions, please consider your own circumstances and the Product Disclosure Statement and Target Market Determinations. For copies, visit As distributor, RACV Insurance Services Pty Ltd AFS Licence No. 230039 receives commission for each policy sold or renewed. Product(s) issued by Insurance Manufacturers of Australia Pty Ltd ABN 93 004 208 084 AFS Licence No. 227678