Finance Attention, home renovators: Not updating your insurance could cost you big time

Attention, home renovators: Not updating your insurance could cost you big time

Home insurance
Disaster could strike at any moment – protect your home investments. Photo: Getty
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Australian home renovators are in danger of losing money after skipping a key part of the renovation process – updating their home insurance.

NRMA Insurance data released on Thursday shows half of Australian home owners made renovations to their homes in the past 18 months.

But 60 per cent forgot to update their home insurance policy once renovations were completed.

With NRMA Insurance finding 13 per cent of renovations cost more than $30,000, experts are urging home owners to protect themselves by bringing their policies up to date.

“A lot of time, effort and thousands of dollars goes into … renovations, so it’s important that home owners take the final step and ensure their home is protected,” warns Luke Gallagher, NRMA Insurance’s executive general manager of direct claims.

So, what’s the best way to find home insurance cover and how do you know when it’s time to upgrade?

Keep your cover up to date

UNSW property and development lecturer Rotimi Abidoye said if a renovation is adding significant value to your property, updating your insurance can make sure you are compensated fully if damage occurs.

Although smaller upgrades, such as a new door, might not be worth paying extra premiums, letting larger investments go unprotected could leave you out of pocket with nothing to show for it, he said.

For example, building a swimming pool could add between 5 to 8 per cent to your property’s value, while adding a room could increase its value by 15 per cent.

But if something were to damage your property, the insurer will pay out an amount based on the current data profile – not the current market value – of your property.

“Renovation improves the value of assets,” Dr Abidoye said.

“So if you really want to be covered adequately when anything happens … update your insurance accordingly.”

If you’re the owner of a renovated property with insurance that isn’t up to date, there’s no time to waste.

No time to waste

“Everything should be done as soon as possible,” Dr Abidoye said.

“[Don’t] let it be something … that you drag for the next six months.

“Nobody knows what’s going to happen tomorrow, and that’s why we have insurance.”

If you’re planning your next home upgrade, Finder insurance expert James Martin said you should notify your insurance provider before you begin renovations to confirm that cover will be available for the changes.

“Some policies actually exclude cover for renovation work, others will charge an added premium,” he said.

“If the work is over the amount that the insurer will set, then you may not be covered.

“So it’s really important to actually be aware of how much your insurance will be able to cover you for.”

Mr Martin said you should read the fine print like the Product Disclosure Statement to learn what you will be covered for.
You can also pick up the phone and speak to your insurance provider directly.

Dr Abidoye said you should tell your provider about the updated value of your home after hiring a professional valuer to inspect the property.

Although you can could just research values of similar properties in your area online, a professional report will take into account details you might not think of, such as the size of your land or the view from your windows.

“Valuers see a lot of assets on a daily basis. They know what people are ready to pay for this asset, and that is what [they] use in determining the value of the asset,” Dr Abidoye said.

How to find the best insurance policy

When it comes time to update your home insurance policy, you can also use the opportunity to shop around for better options.

Comparing your insurance options about once a year is a good habit, Mr Martin said. Even if you don’t want to change your policy or provider, you should review what your policy covers.

“[Finder] found that more than a quarter … of home insurance policyholders don’t actually know what their policy includes,” he said.

Mr Martin said many people don’t realise that flood cover is no longer a standard for home insurance policies.

“I think doing plenty of research is probably the best bet,” he said.