Can you afford to rebuild your property?
The single greatest asset that many of us will own is our home, but how much thought has been placed into the current values? Are you adequately insured and will you be able to rebuild your property to the same standard as it was previously if the worst happened?
Some of the costs that need to be considered are:
- Local building codes and regulations‚Äîhave they been updated, do you need to add additional fire measures to your property, will you need to change the building materials?
- The current replacement cost of your property (excluding land), taking into account any escalation in costs that may occur due to a catastrophe. Builders tend to increase their labour rates when a catastrophe occurs and the cost of building materials also escalates due to the number of properties that need rebuilding which puts pressure on the manufacturers and the ability to source materials.
Some policies do include an "escalation clause" to cover some of these costs
- The cost to remove all the debris from the site and re-level to start again. Consider any hazardous materials that are on site that will need specialist removal.
- Have you included sheds, outdoor structures, pools and outbuildings in your sum insured?
- The majority of policies have an underinsurance clause which determines how close you need to be to the correct replacement sum insured of your property. Generally this is between 10 and 20%, meaning that if you underinsure by more than this "buffer" you will be penalised in a claim. Please refer to your Product Disclosure Statement or Broker for more information on this.
Did you know that after the Blue Mountains fires many people were not able to rebuild their properties due to underinsurance? This was caused mainly by a change in council regulations which has left a number of insured people more than $200,000 out of pocket.
What should you do?
Yearly: Check with your local council that the building regulations have not changed. Ask the council if you are in a flood or fire prone area. Every 1-3 years: Obtain a valuation on your property or at least speak to a builder about current rebuilding costs. Some calculators that may assist: http://www.lmigroup.com/RiskCoach/Calculators/BuildingCalculator.aspx?access=adroit http://understandinsurance.com.au/calculators