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Are you underinsured?

Australian property owners are increasingly putting themselves at financial risk.

The 2013 Understand Insurance Research report, commissioned by the Insurance Council of Australia, found that 83 per cent of homeowners are underinsured while one in 25 Australian homeowners had an uninsured property.

Terri Scheer Insurance, Executive Manager, Carolyn Parrella, said underinsurance could leave property owners out of pocket if a claimable event occurred and they weren’t adequately covered.

“If you own an investment property, a tailored landlord insurance policy is worth considering as it can help protect investors from specific risks not usually covered by standard building and contents insurance policies,” Ms Parrella said.

“Some of the risks typically associated with owning a rental property, include malicious damage by a tenant, theft, accidental damage, legal liability (as landlords) and loss of rental income.”

Ms Parrella said there were a number of things to consider in order to help prevent underinsurance.

Do your research

“When considering property insurance options, it’s often hard to know where to start and what to cover off in your policy,” Ms Parrella said.

“Do your research and seek professional advice on the right policy which suits your needs.

“Premiums for landlord insurance may be based on a number of criteria including location and property type.

“If you have a number of investment properties, be sure to ask your insurer how much you could save by consolidating all under one policy.”

Understand your policy

“Many people sign up for an insurance policy without understanding what they’re covered for,” Ms Parrella said.

The 2013 Understand Insurance Research report also notes more than a third of Australians are uncertain whether they’re covered against flooding or lightning strike, while about a quarter of Australians are unsure whether their building is covered against water, storm or fire damage.

“Natural hazards often cause the most confusion, but are also among the most destructive risks in terms of the structural damage they can cause to a property. It’s the rebuild costs for these types of damages that can catch investors thousands of dollars out of pocket,” Ms Parrella said.

“If your investment property is located in storm, flood or bush fire prone area, you will need to either check your product disclosure statement or contact your insurer to ensure the level of insurance is adequate should there be a need to rebuild or restore a home.”

Have appropriate insurance

“Uninsured landlords really need to think about how they would manage financially if they were faced with thousands of dollars’ worth of damage to their rental property, or were unable to re-let their property while repairs were being made,” Ms Parrella said.

“Landlord insurance can be a small investment which protects a large investment.

“However, damage to the building itself may be at the landlord’s expense unless they have a suitable building insurance policy in place.

“A good building insurance policy should cover for loss of rent, including circumstances when the property cannot be tenanted if damage is repaired.”

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