Are you sure you've got enough insurance cover?

Reported by Pam Wakley
Tuesday, September 5, 2006

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From Money Magazine, September 2006

The risk of under-insuring is that you won’t get enough money to cover the total cost of your loss. But the real cost can be far greater.

If you’ve significantly under-insured your home or contents your insurer may have the right to pay only part of any loss because you’ve insured for only part of what it’s worth.

Let’s say you insure your home for $150,000 but it’s really worth $250,000. Your insurer may have the right to reduce the payout according to the percentage the value has been under-insured. In this case there would be a payment of only $90,000!

The Insurance Council of Australia estimates more than 40% of households fail to correctly assess the value of their home and contents, so there’s a real chance you could be under-insured.

But there’s good news! Doubling the amount you’re insured for will not necessarily double your insurance premium. There are a number of ways you can cut premiums without cutting the value of your insurance.

  1. Be loyal to a particular insurer. The discount depends on the type of policy and how long you’ve held it. As an example, you may get 5% off any home contents policy you’ve held for five years or more. You can also expect premium discounts if you bundle your insurance policies with the one insurer.

  2. Choose a higher excess. Generally the higher the excess the lower the premium. But be careful, it’s not worth having cheap insurance if you can’t afford to make a claim!

  3. Raise the security in your home. You can usually get discounts of at least 5% for smoke detectors, burglar alarms or deadbolt locks.

  4. Shop around. The premiums you pay come down to the history of claims paid by each insurer. One particular insurance company may treat your postcode as higher risk than another insurer simply because of their individual claims history.

  5. Enlist the help of a broker to compare policies. While most brokers specialise in commercial insurance, some, such as Insure Simply, focus on domestic insurance. At www.insuresimply.com.au you can compare policies across eight insurance companies. Insure Simply provides quotes and comparisons from which you then select. The service is free as they’re renumerated by the insurer you sign up with.

For the complete story see Money Magazine's September 2006 issue. Subscribe now.

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23/05/2012 05:16Sydney, Australia. 23 May,2012
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