Underinsurance: The Hidden Risk in 80% of Australian Policies
Construction costs jumped 30%+ in three years. If your sum insured didn't, you may be carrying the gap yourself.
Ask most business or property owners when they last recalculated their sums insured, and the answer is 'when we took out the policy.' Meanwhile, construction costs have risen more than 30% in parts of Australia over three years. The result: the majority of Australian properties are underinsured, many severely.
Why underinsurance hurts twice
The obvious problem is the shortfall — a $2M rebuild with a $1.4M sum insured leaves you $600,000 short. The less obvious problem is the co-insurance (average) clause in many commercial policies: if you're underinsured, the insurer can reduce even partial claims proportionally. Underinsure by 30% and a $100,000 claim may only pay $70,000.
What to include in your sum insured
- Full rebuild cost at today's prices — not market value, not purchase price
- Demolition and debris removal
- Professional fees — architects, engineers, surveys
- Council and code compliance upgrades required on rebuild
- Escalation during the rebuild period (costs keep rising while you build)
Need commercial property insurance?
Offices, warehouses, shops and industrial — protect the buildings and rental income your wealth is built on.