Large percentage of property insurance policy holders underinsured
Posted on Tuesday, October 09 2012 at 1:21 PM
Soft market conditions may have given property owners a false sense of security that their properties are over insured, however it’s not the case, with many property owners left vulnerable, according to Propell National Valuers.
A large proportion of properties are actually under insured,
says Propell National Valuers national quantity surveying manager Isik Bozdag.
A property is considered under insured if an
insurance policy only covers 90 per cent of rebuild costs, according to the
Australian Securities and Commission.
However property prices aren’t related to replacement
costs of building materials, Bozdag says.
“Building costs are increasing, driven by a number of
factors including changes in building codes and fluctuations in the price of
labour and materials. This means that in some areas the replacement costs
associated with property may have risen, resulting in more cost to rebuild than
the property is insured for.”
Misconceptions about the relationship between
property prices and insurance policy coverage are due to the lack of interest
in taking the time to review and shop around for policies, which are often
lengthy and daunting, says Bozdag.
“Policy elements that should be checked thoroughly
include coverage for termite damage, the extent of flood protection and maximum
periods a property may be unoccupied,” he says.
Depreciation is another area property owners should
be particularly mindful of, adds Bozdag.
“Over time the building materials in a dwelling will
depreciate in value, which may be factored into some insurance policies.
“When claiming against property damage, these policy
holders may find they don’t have sufficient coverage to rebuild their home to
its original condition.”
He adds that investors should find a policy that
doesn’t factor depreciation into the coverage, even if it comes at a higher
premium.
“Experienced quantity surveyors and valuers can
provide peace of mind by assisting homeowners with property matters including
insurance, tax depreciation schedules, valuations and portfolios.”
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