Ask an Adviser - With The Rising Cost Of House Prices, Do I Need To Upgrade My Home Insurance?

Top answer provided by:

Steven Genoff

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Thanks for your question Sally,

There are a lot of queries around property right now, with house prices increasing significantly across a lot of areas in Australia. With record-low interest rates in Australia, in some situations loan repayments for a home purchase can be less than the cost of rent, making it more desirable to buy and therefore driving up house prices.

Something to note is that quite often, although a purchaser is going to buy a home based on what they see (ie. suburb, quality of work, number of bedrooms, features), the true value of the property is found where no one can see, the dirt. It is the land itself that is appreciating in value, not the home or the contents within.

Therefore, when looking at insurable items, it is best to dismiss the actual sale price of recent homes in your area, and instead to separate your query into the home itself, and the contents.

Starting with contents, generally, you would be wanting to cover this for the replacement of all the items in the event of burglary or damage. Unless you hold a number of antique items which can appreciate in value, I would not expect the value of your contents to increase significantly over time. However, we do often find when people set up their home and contents insurance, it is immediately after they purchase or move in, and then they do not review for some time.

You should check if you have acquired any additional items since you last reviewed your contents insurance, such as electrical appliances and furniture. You may also want to check if any specific valuables are included in your contents insurance. Such items can include engagement rings, watches, artwork and collectibles.

It is worth checking with your insurer what limits are placed on contents so that you can add valuable items individually. Check out Moneysmart's Contents Insurance guide. For further information, refer to your insurer's Product Disclosure Statement (PDS). 

For your home itself, with recent incentives such as the HomeBuilder grant, most people have found the cost of building has increased due to greater demand. Home insurance itself should be set up to cover the cost of repairing or rebuilding the house if there was a fire, flood, malicious damage or another major catastrophe. A great way to understand the cost of a home rebuild is via this construction cost table.

There are some easy calculations you can make based on level of finish, type of build and features.

Regards,

Steven

 

 

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Article by:

Steven Genoff

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