Home Insurance - Under Insured?

[Discomark]

Saw a TV program recently on how expensive its become to rebuild in bushfire prone areas. Many of the home owners that had to rebuild after the recent Blue Mountains bush fires found that they were under insured when they had to rebuild homes to meet the new Bushfire building codes.
As we live on the bush and the Home insurance policy was up for renewal I asked the insurer (NRMA) to do an evaluation of the rebuild cost, this revealed we were 75k under insured.
I have subsequently bumped the cover up by 75k but also increased the excess from $1000 to $2000 so the policy cost did not go up. As we have never made a claim I figured if I did have to make a big claim the $2k excess would be irrelevant on a home insured for 500k anyway.

As they are predicting the return of El Nino and the amount of fuel in the bushland at the back of our place i feel a lot more comfortable that we now have sufficient cover ;)

Cheers
Mark

[Mick_Marsh]

If I was in the position that I was worried about a bush fire, I'd move out.

But, yes, I take your point about under insuring. You also should take into account the cost of clearing the site and disposing of the rubble too.

[JDNSW]

Agree. My son lost his house about eighteen months ago. Fortunately the house was insured on a "replacement" basis, but the cost of rebuilding (an identical house except for changed regulations) was, in my estimation, about doubled compared to what it would have been without the compliance costs. Also, lost about six months due to the council could not make up their minds whether some of the requirements for a new build were needed (e.g. 20,000l rainwater tank). In his case insurance paid for a lot of his accommodation costs, but you need to think about this as well.

On a separate matter, his contents were underinsured - think about your house contents and remember you are looking at replacement cost, not market value.

John

[101RRS]

When I wanted to renew with AAMI recently I had the opposite issue - if I had taken their estimate for the value of my house I would have had a suburb record price.

They would have been happy to take my premiums but if I had to ever claim I expect the payout to be quite a bit less than what they valued my house (a theoretical figure). The price they were going to insure was double the basic value of the house and about 1 1/2 times the replacement value including block cleanup and admins to build the new house.

Garry

[Discomark]

When I wanted to renew with AAMI recently I had the opposite issue - if I had taken their estimate for the value of my house I would have had a suburb record price.

Garry
Agreed, I also got a quote with AAMI and there estimate was 100k more than the NRMA. 600k for house replacement for a Home+land worth 800k in Sydney seems well over the top.

[Utemad]

When I insured my place last there was an option to have a higher payout in the case of bushfire or other large scale damage in the area. This was to cover the extra cost involved when many houses need rebuilding. I didn't take it though. No need here.

[Discomark]

When I insured my place last there was an option to have a higher payout in the case of bushfire or other large scale damage in the area. This was to cover the extra cost involved when many houses need rebuilding. I didn't take it though. No need here.

Yeah I guess that is another consideration, builders will probably jack up prices if many home are destroyed in the same area due to demand. Maybe I should move to the coast and risk coastal erosion instead :D

[460cixy]

Very interesting in about to do the same thing but its a little tricky as I'm in a body corporate with my neighbour so have to have both places evaluated .

[DiscoMick]

Insurance is a tricky issue.
I was thinking the other day that something is a bit odd when it can be dearer to buy the land than to build a house on it.
I reckon at the moment I could buy another house better than ours for about the same as the cost of rebuilding what we have. For example, not far from where I live you can buy 4-bed two bath double garage houses on small blocks for about $350,000, which would be a similar cost to rebuilding our three bedroom two bath double carport house.
Makes it hard to know how much insurance is really needed or whether you'd be better just to take the money, sell the block and buy somewhere else.

[JDNSW]

Insurance is a tricky issue.
I was thinking the other day that something is a bit odd when it can be dearer to buy the land than to build a house on it.
I reckon at the moment I could buy another house better than ours for about the same as the cost of rebuilding what we have. For example, not far from where I live you can buy 4-bed two bath double garage houses on small blocks for about $350,000, which would be a similar cost to rebuilding our three bedroom two bath double carport house.
Makes it hard to know how much insurance is really needed or whether you'd be better just to take the money, sell the block and buy somewhere else.

Yes, I don't think there is any simple answer, and the situation will be different for each person. But I think this thread will have been worthwhile if it induces people to think about it a bit.

John

[DiscoMick]

Certainly is. And definitely shop around. We did the house insurance exercise recently and saved a significant amount by shifting to RACQ because we also have vehicles with them.
I actually also did a rough recalculation on our contents insurance, decided we had far more contents insurance than we needed and cut it back, saving a bit.
Maybe we just have el cheapo junk in the house :D - the TV is 10 years old and still going strong, for example.