In light of the recent tragic floods, many people, including myself, have looked at their insurance policy to see what they are covered for.
I can’t comment on what defines a “flood” or not…but I can give advice on what investors or homeowners should consider when taking out home insurance.
The Australian Securities and Investments Commission (ASIC) estimates that up to 59% of owners had only insured their home for 70% or less of the cost of re-building.
Some things to consider when taking out home insurance are:
- You need to allow for demolition of the existing structure.
- You need to allow for re-design of the new property. This may or may not include an external project manager to oversee the construction of the property.
- You need to allow for escalation (inflation) of the construction cost. For instance, it may take 6 months from the time the building was demolished until the time property is completed.
To quote ASIC – “Even if you think you have enough insurance, you should check your level of cover, particularly if you haven’t increased it for a number of years.