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Ahead of a long summer, home owners in Western Australia are being urged to check their policies to ensure they do not end up in financial ruin, an industry expert has warned.
The Property Club noted that Western Australia’s financial hardships are likely to have seen a cutback in discretionary spending, meaning consumers are less likely to have insurance cover.
Kevin Young, president of the Property Club, believes people in the west should learn from the east where large-scale bushfires are causing mass destruction.
“The reality is that the Western Australian economy has suffered a massive economic shock unlike the eastern states, and this has forced many property owners in the state to cut back on insurance cover, which could prove to be financially disastrous as the state enters a deadly bushfire season after record hot temperatures during the past week,” Mr Young said.
Mr Young said investors with multiple properties are most at risk as the falling costs of multiple properties put strain on finances.
“This is particularly the case with property investors who may own several properties. With rents falling by over 20 per cent during the past five years in Western Australia, these investors are struggling to pay mortgages in addition to insurance cover.
Underinsurance is already a major issue throughout Australia as highlighted by the Australian Securities and Investments Commission (ASIC) in its report, Getting home insurance – A report into underinsurance.
Highlighting research from ASIC, Mr Young noted that “surveys found that between 27 per cent and 81 per cent of home owners were underinsured by 10 per cent or more.”
In real estate, insurance is a contract or policy that protects an individual or entity’s property from damages and losses, receiving reimbursement from an insurance company.