Is your home underinsured?

Full building replacement basics

• Most home insurance providers require you to choose your own sum insured, which can be hard to estimate yourself.
• The Insurance Council of Australia estimates that more than 80 percent of homeowners and renters are underinsured.^disclaimer
• Building costs have risen substantially in recent years and outpaced many self-nominated sum-insured policies, leaving many more Australians underinsured.
• Only ANZ includes Full Building Replacement as a standard feature across all home and landlord building insurance products, helping you avoid being left underinsured.

What is home and contents insurance?

Home and contents insurance covers the cost of repairing or replacing your house and your belongings when something goes wrong. It may include:

• Building insurance – helps cover the cost of repairing or rebuilding your home (house frame, foundations, roof, fixtures, fittings, shed, pool etc.).
• Contents insurance – helps cover your furniture, furnishings, valuables, personal possessions and unfixed household goods.
• Landlord insurance – helps cover the cost of repairing or rebuilding your investment property, plus costs relating to your tenant such as failure to pay rent or malicious damage.

If you own an apartment, you might have some building insurance through your strata scheme. Otherwise it's up to you to arrange your home and contents insurance, and ensure you have sufficient cover in place.

Why do you need home and contents insurance?

You only need to think about the number of storms, floods and bushfires we've seen in recent years to see the need for home and contents insurance.

In fact, the Insurance Council of Australia (ICA) estimates that "Australians are 5 times more likely to be displaced by a natural disaster than someone living in Europe".^disclaimer

Plus, there's always the possibility of household-specific events that could prove very expensive for owners.

In 2020, 43% of ANZ Home and Contents Insurance claims related to fire, storm and flood. But another 40% of claims came from accidental loss or damage (18%), water or liquid damage (16%) and theft & malicious damage (6%).

How common is underinsurance?

The ICA estimates that around 290,000 Australian households don't have building or contents insurance at all.^disclaimer And of those Australians who do have home and contents insurance, the ICA estimates that more than 80% of homeowners and renters are underinsured.^disclaimer

According to the ICA, some common causes for underinsurance are:^disclaimer

• Guessing how much it would cost to repair, rebuild or replace property and contents.
• Not accounting for upgrades to your home and belongings.
• Increased building costs. 
• Supplementary costs (e.g. cost of demolition, clean-up, asbestos removal, council applications, architect, and surveyor services, and even the cost of temporary accommodation during a rebuild).
• Not accounting for all your assets.

How can you avoid underinsurance?

CoreLogic have an online building insurance calculator and a contents insurance calculator to help you check your sum insured is sufficient to cover the cost of a rebuild.

Another way to get adequately insured is to ensure your home insurance policy includes Full Building Replacement cover (i.e. it doesn't rely on you picking a number for your sum insured). Depending on your current policy this option may increase your premium, but it will help ensure you won't leave yourself short when it matters.

How does Full Building Replacement work?

Full Building Replacement means that your insurer will cover the full amount required to have your house rebuilt or repaired to the same condition it was just before the damage occurred – regardless of the cost.

Importantly, ANZ Home & Contents Insurance Full Building Replacement also includes cover for additional costs you may not consider when assessing your own sum insured – such as emergency accommodation offered for up to 24 months (also for your pets) if your house is destroyed in a catastrophic event – plus cover for legal, architect, surveyor and demolition fees.^disclaimer

With ANZ's Full Building Replacement as standard, you won't be forced to spend significant money if construction costs rise or new building codes require changes to your original home – as would happen if your sum-insured policy doesn't cover the real cost of the rebuild.