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Western Australian property owners are warned about underinsurance as bushfire seasons hits.
Blogger: Rory O'Rourke, principal, O'Rourke Realty Investments
The huge destruction caused by bushfires in Esperance during the past week as well as the bushfires in 's Eastern suburbs over the weekend, highlight the need for property owners in Western Australia to properly insure their properties.
For most people, their residential home is their biggest financial asset and insurance is critical especially for people who may own several properties such as investors.
This widespread destruction of properties during the past week covering such a large geographic area shows that no one is immune from having their home destroyed.
The bush fire season in WA has now arrived and it is time for all property owners to re-assess their insurance cover.
Whether it is the threat of bush fires, storm damage or accidental fires in the home, property owners should check that they have adequate insurance cover.
Many people underestimate the cost of repairing or rebuilding their homes because construction costs have risen very sharply over the last decade.
The danger of underinsurance has been highlighted by the Australian Securities & Investments Commission (ASIC) in its report, Getting home insurance – A report into underinsurance. ASIC notes surveys that have found that between 27 per cent and 81 per cent of homeowners were under-insured by 10 per cent or more.
ASIC also highlighted research which found that 24 per cent of consumers did not increase their insurance following renovations costing between $20,000 and $60,000.
The danger of underinsurance is particularly high for first home buyers who have little equity in their homes and may try to save funds by limiting their level of insurance.
It is a traumatic enough experience to have your home destroyed by a fire or storm. However, it is even more traumatic if you don’t have the necessary funds to rebuild the property due to lack of insurance.
In addition, it is believed that only a small proportion of investment properties have some form of rental insurance product.
These insurance products provide the investor with protection against malicious damage to the property as well as loss of rent.
A bad tenant can cause thousands of dollars damage to a property and may owe several thousand dollars in rent before they are finally evicted by the courts.
Many property owners view insurance as an unnecessary expense and they under-insure their property or do not have any home insurance.
By trying to save a few hundred dollars each year in insurance, these property owners are putting their financial future at risk.