09 May Is your Noosa Rental Property Insured?
Are you fully insured?
Strong market activity, combined with a shortage of labour and materials, means that the cost of repairs, maintenance, and replacement of your property, in the event of an incident, may have increased.
The result could mean that owners have investment properties that are under-insured, without even knowing it.
This is an issue that owners do need to be aware of, according to local Noosa Insurance Broker Joel Laventure, from iO2 Insurance.
“Under-insurance has become a bigger issue over the last couple of years due to rising construction costs and shortages of materials and labour, Insurers require their customers to self-determine their replacement value, and ensure that is as accurate as possible, we do advise clients to obtain their own independent building replacement valuation. To help demonstrate the negative financial effect of under-insuring, we have a simple insurance claim calculation scenario for clients to consider when reviewing their sums insured”
– Joel provides the following important information for our owners.
Effect of Under-Insurance (Relating to Property Damage Insurance)
The effect of the under-insurance clause in insurance policies has an impact on partial losses (ie. Where the home is only partially damaged, not destroyed). The clause is designed by insurers to act as a penalty when you select a replacement value that is significantly under-valued. Below is an example claim scenario to demonstrate how the clause impacts a partial loss:
Claim scenario – you under insure the replacement value by 50%
- The true building replacement value = $500,000
- The policyholder decides to insure the building for $250,000 only, rather than the full $500,000 replacement value
- A storm damage loss causes $50,000 damage to the building
- The insurer when assessing the claim applies the underinsurance penalty. In this case the policyholder has underinsured by 50% (half of the full $500,000 replacement value.)
- The insurer when calculating the claim pay out applies the 50% penalty to the $50,000 cost to repair the damage, and the policyholder only receives $25,000 as a result.
“To avoid the potential impact of under-insurance we urge you to carefully review the replacement value you have chosen, and seek a professional valuation where required,” he adds.
Concerned about being under-insured?
If you are considering updating your policy and want a fresh opinion, we recommend local and Noosa specialist Insurance broker i02 Insurance (that we use for our properties).
Unlike many other providers that require landlords to deal directly with insurers in the event of a claim, their model is around service to customers. They do the legwork for you and provide a personal service along the way.
Any questions? Please feel free to contact us for a personal referral to Noosa based iO2 insurance who can provide an obligation free appraisal of your circumstances.