Adequate insurance coverage is vital to ensure your risk is reduced for unforeseen circumstances. The widespread damage to properties by storms covering such a large geographic area shows that no-one is immune from having their home damaged. And as we enter the summer months when the danger of bush fires is also extremely high in some areas of Australia, it is timely to remind property owners to have adequate insurance cover. Many people underestimate the cost of repairing or rebuilding their homes because construction costs have risen very sharply over the last decade. The danger of underinsurance has been highlighted by the Australian Securities and Investments Commission (ASIC) in its report, “Getting home insurance – A report into underinsurance”. ASIC notes surveys which have found that between 27 per cent and 81 per cent of home owners were underinsured by 10 per cent or more. ASIC also highlighted research which found that 24 per cent of consumers did not increase their insurance following renovations costing between $20,000 and $60,000. The danger of underinsurance is particularly high for first-time property buyers who have little equity in their homes and may try to save funds by limiting their level of insurance. It is a traumatic enough experience to have your home destroyed by a fire or storm. However, it is even more traumatic if you don’t have the necessary funds to rebuild the property due to lack of insurance. In addition, it is believed that only a very small proportion of investment properties have some form of rental insurance product. These insurance products provide the investor with protection against malicious damage...
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