Just one in nine homeowners (11.5%) feel confident they know what it would cost to rebuild their home at today’s construction prices, according to new Compare the Market research highlighting a concerning knowledge gap that could leave thousands of Australians underinsured.
The survey also found 34.7% of homeowners did not feel confident setting a rebuild value for their property, while 53.6% said they had a rough idea but did not feel completely sure.
When asked to describe their current level of insurance coverage, 15.4% of respondents worried they could be underinsured and 14.8% were unsure whether they had the right amount of cover, while around a quarter (24.6%) felt they could be overinsured or paying for features they did not need.
Only 45% of respondents believed they had the right level of cover.
Compare the Market Economic Director David Koch said some Australians could be “catastrophically underinsured” without knowing it, while others could be wasting hundreds or even thousands of dollars on cover they do not need.
“Home and contents insurance has become extremely expensive for many households over the past few years,” Mr Koch said.
“That means some people may be cutting back on cover just to cope. That is a really scary situation, because it could leave them out of pocket if they ever need to claim.
“But on the other hand, some people are paying hundreds – sometimes thousands – of dollars more than they need to, because they are factoring in their land value on top of reconstruction costs.”
Mr Koch encouraged Australians to use free rebuild cost calculators to help narrow down the amount of cover for their home.
“Don’t just try to guess what it might cost to rebuild your house today – most people don’t have the specialist knowledge to do that,” Mr Koch said.
“The rebuild cost of a home can differ significantly from its market value, because it is based on the cost of materials, labour, professional fees and demolition or debris removal — not the value of the land it sits on.
“Many insurers, and services like Compare the Market, now provide rebuild estimates or calculators to help take the guesswork out. If you have not updated your cover in a few years, try running a quote comparison – you might be surprised to find your level of cover is below or above what you expect.
“The worst time to find out you’re underinsured is after a fire, flood or major storm. A quick review now could save a whole lot of financial pain and heartache later.”
