As a homeowner, you probably know that having insurance is important. After all, you never know when something unexpected might happen, like a fire or a break-in. But did you know that having the right amount of insurance – and making sure it’s up-to-date – is just as important as having insurance in the first place?
First of all, having the right amount of insurance – also known as having an “accurate sum insured” – means that you’re protecting your home
to the fullest extent possible. If something does happen, like a fire or a break-in, you’ll be able to get the money you need to repair or replace your belongings, or even rebuild your home if necessary.
But here’s the thing: if you don’t have enough insurance – if you’re “underinsured” – you might not be able to get the money you need to fully recover from a disaster. For example, let’s say you have a fire that destroys your home and everything in it. If you’re underinsured, you might only get a portion of the money you need to rebuild or replace everything, which could leave you in a tough financial situation.
Another reason why accurate sums insured are important is that they can affect the premiums you pay for your insurance.
If you have too much insurance – if you’re “overinsured” – you might be paying more for your premiums than you need to. On the other hand, if you’re underinsured, you might not be paying enough, which could leave you at risk if you need to make a claim
But how do you know if you have the right amount of insurance?
The first step is to take an inventory of your home and belongings, including things like furniture, electronics, and personal belongings. This will help you get a sense of how much everything is worth, which can give you a good starting point for figuring out how much insurance you need. There are lots of online calculators available that can help you work out a good figure. We love the Understand Insurance resources
which provide a contents and a building sum insured calculator as well as a handy inventory spreadsheet template that you can use.
Once you have an inventory, you should also consider things like inflation and rising costs. For example, if you bought your home 10 years ago and insured it for $200,000 at the time, you might need to increase your insurance to account for the fact that the cost of building a new home has probably gone up since then.
Finally, it’s a good idea to review your insurance regularly to make sure you’re still adequately covered. Things can change over time – you might buy new belongings, renovate your home, or even move to a new house – so it’s important to make sure your insurance is still accurate and up-to-date.
In the end, having accurate sums insured is just as important as having insurance in the first place. It can help you protect your home and belongings to the fullest extent possible, and it can also help you avoid paying too much for your premiums.
By taking the time to inventory your home and belongings, consider inflation and rising costs, and review your insurance regularly, you can make sure you’re adequately protected and avoid being underinsured.