Alfred exposes shocking Aussie property insurance shortfall

A leading property expert says cyclone Alfred has exposed an Aussie practice swept under the carpet for years, which could have a devastated impact nation-wide.

Australian property insurance experts, warn homeowners were exposed to a dire financial crisis if they sustained damage by Cyclone Alfred due to many under-insuring their homes to cut costs for years – a practice that occurs nationwide.

Based on current information, there’s no doubt Queensland and New South Wales property owners are in for devastating insurance challenges once the full force of Alfred has passed.

Most properties simply don’t have enough coverage to adequately ensure they can be properly repaired or replaced after a crisis event like this.

Residential property alone is estimated to be underinsured by 18 per cent on average. So, if a home’s true insurance value was $650,000, which is reasonably common, its owner would be up for around $117,000 to cover the shortfall in replacing their destroyed property.

It’s apparent few understand the monumental impact this can have on not just property owners but consumers and the economy as well. In extreme cases, the result has been businesses that are essential to some communities being closed permanently.

Cost-of-living pressures compelled some owners to ‘discount’ their premiums via underinsurance or even choose to cancel expensive insurance coverage altogether which will obviously prove to be a financially devastating decision. A combination of factors has brought us to this point, such as fast-rising construction costs, unreliable automated insurance calculators and a lack of available labour.

ABS data from two years ago indicated 23 per cent of Australians had no property insurance at all. I’d suggest the number is even greater now.

STEPS TO TAKE IF YOU ARE CLAIMING:

Whilst it’s impossible to get new coverage or update your policy if a major event is bearing down, there are some things property owners can do to ease the fallout.

• Follow government advice to prepare your property to minimise damage.

• Take your current home and other property insurance policy out of the filing cabinet and keep it with you, along with other important documents.

• Read the policy and see what you are covered for.

• After the event: Comprehensively document your damage and losses.

– Take photos and videos.

– Make notes, date and timestamp them.

– Contact your insurer as soon as possible to get your claim underway.

• Later: Commission a comprehensive and accurate insurance estimate for your property from a qualified professional. Don’t rely on estimates from an unqualified operator or, even worse, online insurance calculators as they’re notoriously inaccurate.

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.

Parts of this blog originally seen at https://www.realestate.com.au/news/author/sophie-foster