Time to read : 3 Minutes
Former fire chief calls out a common cause of underinsurance:
Many Australian households in fire danger zones are severely underinsured, according to New South Wales’ former rural fire chief.
Ex-fire commissioner Shane Fitzsimmons - who was in charge during NSW’s Black Summer in 2019 - has called out what he sees as a problem with quick quote-and-buy home cover.
“In my previous home I was on the edge of a bushfire interface, I was in a flame zone. When I go online to various insurance companies, if I go in there, I get asked the generic suite of questions like what's the construction material, how many bedrooms is it? How many levels is it? Is there a garage?”
Why it matters:
We’re currently in an El Niño weather event, which increases the risk of bushfires.
And, sadly, more bushfires means more people losing their homes. The cost of home insurance has been rising as insurers look to recoup losses from last year’s floods.
Some insurers are also attempting to price what they consider to be risky properties out of the market entirely, which means that if you live in a fire or flood risk area, your hip pocket is about to hurt - again.
Ex-commissioner Fitzsimmons says a lot of people buy home cover “in good faith” not realising they may be underinsured.
“To rebuild that home is going to be at least another 20% or 30% of the value on top of what a conventional home is, and that's not necessarily being factored into cover all the time.”
Fitzsimmons is calling for insurers to use the tech and data at their disposal to alert homeowners to their risks of underinsurance if they’re in a fire or flood zone.
It’s worth noting that the former rural fire chief is broadly complementary towards insurers, especially when it comes to responding to major events like bushfires.
What to look for when you decide to take out home insurance:
Check if your insurer thinks you’re in a fire or flood zone. That’ll give you an idea of the level of risk you need to consider.
Remember - you’re looking at the cost of rebuilding your property and replacing all your contents.
The lowest priced policy may not always be the best one for you.
If you get stuck or worried your home insurance isn’t enough, there are home insurance brokers who can help.
The cost of home insurance has been rising as insurers look to recoup losses from last year’s floods - and some insurers are pricing what they consider to be risky properties out of the market.
The bottom line:
Home insurance isn’t a bill we want to spend too much time thinking about, but as premiums rise it’s vital for homeowners living in fire or flood-prone areas to ensure your payout actually reflects the value of rebuilding your property - and replacing any contents inside.
That’s probably worth speaking to a financial professional, or at least spending an extra ten minutes checking your home insurance details if you’re buying online.
