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Ensuring you get the right insurance

By Louise Morrin

It recently came out that the world is facing a challenge in the form of property being underinsured. A recent study from European insurer Swiss Re found that even while the middle class in affluent countries has been growing wealth, they haven't been insuring themselves properly. And Australia's no different. 

In fact, it might be accurate to say that if you're buying a home in Australia, whether it's real estate in St George or property in Western Australia, it's particularly important to be insured. Australia is known for its unwieldy weather and climate, which can put property at risk. But you've got to choose the right policy to be fully protected.

Choosing home insurance

When you choose insurance, you are typically picking between two broad options: Sum-insured and total replacement cover. 

Sum-insured cover is the more common of the two, and works by insuring you up to a particular numerical value. One downside to this is that it's not easy to know how much it might cost to rebuild your home, and the cost of doing so may climb (either naturally or due to renovations you've carried out), making this value obsolete in some years time.

Remember, too, that there are a number of supplementary costs should the worst happen and you have to reconstruct your house, such as paying architects to draw up designs and the expense of your lodging while you stay elsewhere. 

Total replacement cover, on the other hand, insures you for the total cost involved in rebuilding your home to how it was before an incident. Because it doesn't attach a single, unchanging value to the rebuild, you can have peace of mind about whether you'll be fully covered if anything happens. It does tend to be pricier, however.  

Discussing these two options is a good starting point for picking home insurance. Even if you haven't bought that dream real estate in Beverley Park, Carlton or nearby areas, it wouldn't hurt to start talking about it now – you'll likely eventually have to take it out, after all. 

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