“This Epidemic of underinsurance could be totally shattering”

Underinsurance – where you take on the cost of paying out, if a risk event happens, yourself.

Which is fine if you know about it.

But if you don’t, and the risk event happens you could be in for a huge shock. Simply put, if you insure your house for $300,000 and it costs $500,000 to rebuild, then you are fitting the extra bill of $200,000, not the insurance company. That means you are under insured by $200,000.

And a recent survey by MCG Quantity Surveyors estimated that thousands of Australian homes could be under-insured by up to 66%. *

The cause – reliance on web-based calculators promoted by insurance companies.

“Not only do these calculators tend to underestimate construction costs overall. Most don't include amounts for demolition, debris removal, cost escalations, and consultant's fees.”

If it’s cheap, you’re probably paying for the risk.

Insurance companies can get caught up in price wars and as consumers, we play along. After all who doesn’t want a cheap price. Then the arrival of the digital world opened a whole new world making it easy to go online and get a quote. Even buy it, if you felt the price was right.

But the as the saying goes “caveat emptor” or buyer beware – which means reading through all the fine print and becoming a part-time bush lawyer. Because with insurance it is straight forward – if it’s cheap they have probably left stuff out. Stuff that you will have to pay for.

Or you could get advice

When you engage an Insurance Broker, they take the time to get to know you and your business so that they can ensure that there are no gaps, or where there are gaps you know about it. Only then can they identify all the risks that are there. Advise you as to the best protection for you, your family, your business.

Then it’s up to you. At least you can make an informed decision. What risks you want to protect and what risks you are prepared to fund yourself.

You are also protected by your broker’s legal obligation to act in your best interests, providing from a range of different insurers and different products.

As opposed to insurance companies acting in their shareholders best interests only able to provide their own product, simply not providing you with any choice.

However, if you like gambling then just play the insurance web calculator roulette.

* www.insurancebusinessmag.com/au/news/breaking-news/webbased-valuation-calculators-cause-an-epidemic-of-underinsurance--study