Are You Underinsured? How to Know if Your Cover is Enough

Research consistently shows that a large proportion of Australian homeowners and renters are underinsured — meaning if they ever needed to make a major claim, their payout wouldn't come close to covering their actual losses. Here's how to check if you're one of them.

What Does 'Underinsured' Actually Mean?

Underinsurance occurs when the amount you're insured for is less than what it would actually cost to repair or replace what you've lost. This is surprisingly common — and the gap often only becomes apparent at the worst possible time: when you're trying to make a claim after a fire, flood or major event.

Why Do So Many Australians End Up Underinsured?

• Setting the insured amount based on purchase price rather than rebuild cost
• Not updating cover when making significant renovations or improvements
• Underestimating the value of contents — especially accumulated over many years
• Accepting the default sum insured suggested by an insurer without verifying it
• Not reviewing cover annually as costs increase with inflation
• Not reading the policy carefully to understand exclusions and sub-limits

How to Audit Your Home Insurance

Step 1: Check Your Building Sum Insured

Your building sum insured should reflect what it would cost to completely rebuild your home from scratch — including demolition, architect fees, council approvals and construction at today's rates. This is almost always more than the purchase price or market value of the property.

Step 2: Check Your Contents Sum Insured

Walk through every room and mentally tally the replacement cost of everything — furniture, appliances, clothing, electronics, jewellery, sporting equipment, art. Most people significantly underestimate this total. A simple room-by-room spreadsheet often reveals a gap of $30,000–$80,000.

Step 3: Review Your Policy for Sub-Limits

Most policies have sub-limits — caps on specific items like jewellery, art, or portable electronics. If you own high-value items, check whether they're adequately covered or whether you need to list them separately.

Step 4: Check for Exclusions

Read the Product Disclosure Statement (PDS) carefully. Common exclusions include flooding (different to storm damage), certain types of structural failure, and events caused by lack of maintenance.

When Should You Review Your Insurance?

• Annually — at renewal time at a minimum
• After a renovation or major home improvement
• After significant purchases — new furniture, jewellery, electronics
• After a change in circumstances — new family member, working from home
• When you notice building or construction costs rising significantly in your area

How a Broker Can Help

Going direct to an insurer means you only get their view of what you need. As a broker, we can compare policies across the market, identify gaps in your current cover, and make sure you're not just buying the cheapest policy — but the right one.