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No insurer ever says you have too much insurance!” Or do they? Yes! You don’t want to be over-insured. Here’s why:

Over-Insurance Explained

Over-insurance means your property is insured for more than it would cost to replace. For example, if you insure your property for $1 million but it would only cost $750,000 to replace, you’re over-insured.

Why is Over-Insurance a Problem?

  1. Wasted Money: Higher insurance coverage means higher premiums. If you’re over-insured, you’re paying more than necessary.
  2. No Extra Payout: Insurers only pay the actual cost of a loss. If your $1 million insured property is worth $750,000, you’ll only get $750,000, even though you paid for more coverage.
  3. No Premium Refunds: Insurers won’t refund the extra premiums you paid for over-insurance.

Why Insurers Limit Payouts

Insurers include clauses to prevent over-insurance to avoid policyholders profiting from a loss. They only pay the actual cost to rebuild or repair to prevent deceptive behavior.

Getting the Right Coverage

Ensure your sums insured are accurate. Here’s how:

  1. Building Insurance: Base it on the cost to replace the building and its features, not the market value.
  2. Contents Insurance: Cover your contents, not your tenants’ possessions. They need their own insurance.
  3. Strata Complex: Check what’s covered by the body corporate’s insurance and insure what’s not covered separately.
  4. Online Calculators: Use tools like the Cordell Sum Sure building insurance calculator and the Home Content calculator on the ICA’s website.
  5. Professional Help: Get precise figures from a quantity surveyor or builder.
  6. Regular Updates: Review and update your sums insured regularly to match current costs.

DIY Tips

  • Exclude land value, focusing on buildings and structures.
  • Use current building costs and standards.
  • Include improvements, debris removal, architect and council fees.
  • Don’t forget to include GST.

By ensuring accurate insurance coverage, you avoid paying too much and get the right protection for your property.

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