Tag: insurance broker

The Risks of Underinsurance

One of the biggest things that keeps us awake at night as insurance brokers is when friends, family or clients are uninsured or underinsured. Some will opt out of insurance claiming cost as the biggest deterrent, but many have never properly had underinsurance explained to them and simply don’t understand the implications on their business or family.

‘If you think insurance is expensive, try ignorance.’

They say that the cost of education is high, but the cost of ignorance is higher – well, today we’re going to share some education with you for FREE in hopes that it helps you understand and make informed decisions about your risks. And so we can get a good night’s sleep. ?

Understanding underinsurance

We get it, insurance isn’t the most interesting and compelling topic. Many consider it a grudge purchase and just look for the easiest and cheapest way to cover the bare minimum or mandatory insurance requirements. And then many of us experience an insurable incident and realise the value and importance of insurance just a little too late.

If this sounds like you, you’re not alone. Research indicates that Australia is one of the most underinsured nations in the developed world[1].

What is underinsurance?

Underinsurance is defined as the situation when your insurance covers less than 90% of the total costs in the event of a loss[2].

This can apply to business insurance, home insurance, car insurance or most other types of insurance policies.

Some contracts have averaging provisions that reduce the sum paid out by a certain percentage when the sum insured is less than the value of the insured object.

For instance, if you insure your contents for 25 per cent less that their true value and lodge a $30,000 claim, the insurer may reduce your claim by $7500[3].

Therefore, being uninsured or underinsured may not save you money in the end, and could cause a great deal of financial difficulty and heartache in a worst case scenario.

5 common reasons you could be underinsured

  1. When you renew your policy each year you don’t check the details or alert your insurance broker to anything that’s changed in your situation.
  2. You’ve changed, renovated or added features to your home.
  3. You’ve purchased expensive items, such as machinery, jewellery or electronics.
  4. You haven’t calculated an accurate value for your home or contents.
  5. You didn’t include the full costs that could be incurred in the case of an incident in your total sum, such as demolition, removal of a debris and rebuilding.

Am I underinsured?

The best way to get confident about having a strong insurance solution is with the help of your insurance broker. And insurance is not a ‘set and forget’ programme – you should have an open and honest discussion with your broker each year ahead of your renewal. The good news is that having appropriate insurance doesn’t necessarily mean you have to spend a huge amount more money – with the help of your broker, many insurers will also take into account other factors such as your risk management practices when it comes to pricing. Get some peace of mind, and talk to your insurance broker about underinsurance today!

[1] According to a survey conducted by Zurich in partnership with Oxford University

[2] ASIC definition on MoneySmart.gov.au

[3] Source: http://understandinsurance.com.au/do-you-have-enough-insurance