Underinsurance and how to avoid it

Underinsurance and how to avoid it.

 

Avoiding underinsurance means protecting yourself from out-of-pocket costs when your building sum insured doesn’t cover your loss.

 

Body Corporates / Owners Corporations (OC’s) avoid underinsurance by following the recommendations in their insurance valuation report. It’s a requirement for all OC’s to get one of these every 5 years to comply with the law.

 

It’s often misunderstood what a valuation report involves. It has to consider the total estimated total costs of repair and replacement of your buildings like-for-like, in the event of a total loss PLUS the auxiliary costs like removal of debris, fees of surveyors, architects and other professionals.

 

The value insured must be for day 365 of the insurance policy (expiry date). It must also consider increased costs of labour and materials, documentation and construction time, foundations and underground services.

 

Any shortfalls in the sum insured are the responsibility of the unit owners.

 

Our advice is to always follow the state laws requiring the property to be insured for full replacement value. That’s how to avoid underinsurance.

 

Insurers compete over quality risks as they attract better pricing. Here are some practical tips for minimising the cost of your insurance:

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1. Excesses: increase these from the defacto $1,000 per claim.
    

2. The importance of well-maintained property cannot be underestimated. Review your property condition often and plan for maintenance work
    

3. Manage risks effectively at your property.