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Working out your sums insured

Whether it's building materials, raw materials for your business, vehicle spare parts or general home contents items... everything is going up, and the current forecasts in late 2022 are showing that this is going to be the new normal for a while yet.

We're also seeing an increasing frequency of extreme weather events year after year which isn't helping things either, so your chances of needing to make a claim are increasing, and when that happens the payout figure is likely to be much higher than it was in years previously.... in some cases this is leading to increasing premiums and like many industries we are all sitting back thinking "I've never seen anything like this before".

As difficult as it is financially, it is important to try and set your sums insured high enough to ensure you would be able to rebuild or get back to your pre-loss position. Which is ultimately the goal of having insurance in the first place - even if your couch was a bargain on Marketplace, you should insure it for its replacement cost.

With Home & Contents Insurance it's also important to consider the definitions in your policy wording. For your Building you should factor in driveways, fencing, sheds, tanks etc. (keeping in mind that for larger properties you may need to consider Farm Insurance - more info available here). With Contents you need to include carpets, floating floorboards, window furnishings and then pretty much everything else that's not fixed down.

The industry rule of thumb to avoid being underinsured is to have your Contents Sum Insured set at 1/3rd of the Building Sum Insured - give or take depending on your specific circumstances. It's not an exact science, but if you asked to take out $30,000 Contents cover for your $600,000 Building we would encourage you to consider this further. Likewise if you wanted to insure $300,000 Contents for your $300,000 Building we would also want to have more of a discussion with you. We're not builders or quantity surveyors, but we can help you to make an informed decision.

These are two very helpful online calculators that are widely used in the insurance industry to assist in calculating your own sums insured:

If these links aren't available at the time of reading this please try here instead.

If you wanted to take things further and have a formal insurance valuation done these are some of the companies that offer this service: (especially for collections & antiques)

Once you've gone through this exercise please share the results with us so that we can keep these on your file and review any necessary changes to your policy coverage.

Lastly, this is an opinion piece that discusses the awful reality of being underinsured, and things haven't really changed since:

By spending the time on this now, we hope that you won't end up in a similar position should the worst case scenario happen to you.

As always, this advice is extremely general in nature and doesn't take into account your personal circumstances, you should always consider the PDS/Policy wording before making a decision.

Coverage may differ based on specific clauses in individual policies.

Please contact us if you would like us to assist you further.

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