Why Insurance Matters: Protecting What Counts
Insurance exists to safeguard you, your family, or your business from financial setbacks that could be impossible to manage alone.
Unfortunately, many Australians find themselves underinsured or completely uninsured—often realizing this only when it’s too late.
The Problem of Underinsurance and Non-Insurance
One common reason for underinsurance is undervaluing your assets. Taking practical steps to accurately assess your belongings can significantly reduce this risk. [Learn more about minimising your risk here.]
Sometimes people avoid insurance because they think it’s too expensive, unnecessary, or too complicated. Others believe their possessions aren’t valuable enough to insure, or they assume they can self-insure by saving money instead.
When it comes to purchasing or renewing insurance, it’s essential to make informed decisions. Think about how your life and your family would be affected if a disaster damaged or destroyed your property. How would you rebuild? Could you replace essential items like clothes, furniture, and electronics without insurance? Would your savings cover it, or would you need to rely on friends, family, or charities?
Non-Insurance: A Hidden Risk
Australia’s insurance market is competitive, offering a wide array of products tailored to diverse needs, with various coverage levels and options to manage premium costs.
Despite this, many Australians remain uninsured. According to the Australian Bureau of Statistics, about 1.8 million homes—nearly a quarter of all houses—lack home and contents insurance. That’s roughly equivalent to the number of homes in Sydney or Melbourne!
Some vehicle owners mistakenly rely solely on mandatory personal injury insurance required for vehicle registration. However, this only covers injury to others caused by you, not damage to vehicles or property involved in accidents.
Cultural factors, income levels, and family situations also influence insurance uptake, with couples more likely to have coverage than single individuals.
Widespread non-insurance can strain government resources during disasters, ultimately affecting taxpayers. While government disaster assistance exists, it typically provides only emergency support (food, shelter) and isn’t enough to rebuild homes or replace belongings.
Underinsurance: When Coverage Isn’t Enough
Underinsurance happens when the value you insure your property or belongings for falls short of their true worth.
This issue is most common with home and contents insurance. Generally, if your coverage is 90% or less of your rebuild costs, you’re considered underinsured.
Being underinsured means your policy won’t fully cover your losses, leaving you to pay the difference out of pocket—potentially causing serious financial strain.
Some policies include "averaging" clauses, which reduce payouts proportionally if the insured amount is less than the actual value. For example, if you insure contents for 25% less than their true value and file a $30,000 claim, your insurer might reduce the payout by $7,500.
Ultimately, being uninsured or underinsured can be more costly than it seems, as financial losses will be borne by you, your family, or even the broader community.
Why Does Underinsurance Happen?
Several factors can lead to underinsurance, including:
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Gradual accumulation of possessions: Over time, new purchases like TVs, appliances, furniture, and tech can add up quickly—often more than expected.
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Not accounting for upgrades: Renovations or replacing items with higher-value versions means your insurance should be reviewed and adjusted accordingly.
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Financial prioritisation: Some choose premiums based on what they can afford rather than insuring the full value of their assets.
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Rising building costs: Construction expenses tend to increase yearly, and compliance with updated building regulations can add to rebuilding costs.
How to Avoid Being Underinsured
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Use online home and contents calculators to estimate the right amount of cover. Many insurers offer these tools on their websites or as mobile apps.
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If your calculated coverage differs from your current insured amount, do a detailed room-by-room inventory of your belongings. This can also simplify claims if needed.
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Remember, resale value isn’t the same as rebuild cost. Consult a builder or professional valuer to determine the true cost of rebuilding your home and any external structures, including additional expenses like demolition and council fees.
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Regularly review your insurance coverage, especially at renewal time, to ensure inflation or upgrades haven’t eroded your protection.
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Understand your policy terms by carefully reading the Product Disclosure Statement, including differences between total replacement and sum insured policies, and between defined events and accidental damage.
By investing time in understanding your insurance needs and maintaining appropriate coverage, you can protect yourself from potentially devastating financial losses and have peace of mind knowing you’re prepared.
