QLD/NSW floods: Underinsured by ‘hundreds of thousands of dollars’
Flood-affected homeowners could be left with a hefty bill or forced to walk away as experts warn some may be underinsured by ”hundreds of thousands of dollars”.
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Flood-affected homeowners in Queensland and NSW could be left with a hefty bill or be forced to walk away from their homes as experts warn many may be underinsured by as much as ”hundreds of thousands of dollars”.
The rain bomb and widespread flooding comes at a time when construction costs and materials have been soaring, and with tradies already under the pump with work, and a severe lack of rental vacancies, the after effects of the natural disaster could be felt long after the mud and debris has gone.
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And MCG Quantity Surveyors director Marty Sadlier has been sounding the alarm for months.
“Property owners could be left hundreds of thousands out of pocket should an unfortunate event have them calling their insurance provider,” Mr Sadlier said back in August last year.
“Unfortunately, most will only discover they are woefully underinsured when it’s too late.”
And that alarming prediction could now be coming true for east coast flood refugees, as the full extent of the disaster becomes clear.
Six months ago, Mr Sadlier said their estimates suggested that the cost of building an average Aussie home in capital cities such as Sydney and Brisbane, with both cities impacted, had risen by over 10 per cent in the preceding six months, or around $50,000 for the median construction cost for a house.
Further, he said, wait times for construction had blown out, on average, by about 16 weeks.
But fast-forward to February, even before the floods, and those cost blowouts and wait-times had only worsened, and underinsurance is rife.
“It is a hugely populated area that is affected,” Mr Sadlier said. “We are talking hundreds of thousands of properties that could be affected.
“That is a lot of people facing the prospect of not being adequately covered.”
The Insurance Council of Australia (ICA) had received almost 61,000 claims by Thursday, with almost 45,000 from Queensland and almost 14,000 from NSW.
Eighty-three per cent of those related to property, with the remainder for motor vehicle damage, with early estimates putting the total damage bill at $900,000 and climbing.
“The ICA has raised with government stakeholders concerns about the impact of labour constraints and materials shortages on the rebuild and recovery process,” a statement from the ICA said.
“The current flooding comes off the back of a period of consistently high claims because of ongoing summer storm activity, and impacts from the pandemic on labour and materials availability and building costs.”
Mr Sadlier said that previous research by ICA had revealed that more than 83 per cent of homes were underinsured, but he believes, based on their own research, that number was now more likely to be north of 90 per cent due to soaring material costs.
He said construction calculator cost estimates used by homeowners had also been lacking, and had been off by between 10 and 66 per cent.
“My guess is that construction costs could go up a further 5-10 per cent or more this year, and probably won’t stabilise until mid-2023,” he said.
“Builders were taking orders for 2023, before the floods, so my guess is the wait time for a rebuild will also be substantial compared to the past.
“Rents will soar because people won’t have anywhere to go as so many rentals have also been affected.
“There will be even greater competition for everything. It is the perfect storm in terms of a disaster.”
He said Australia would likely need to bring in skilled labour from overseas just to deal with the sheer number of damage claims.
A national survey by comparison site Finder revealed that 59 per cent of Aussies were covered by home and contents insurance, with that falling to 58 per cent in Queensland and 55 per cent in NSW.
But less than half of those (41 per cent) had flood cover included in their policy, the survey revealed.
Finder insurance expert James Martin said underinsurance was a major concern.
“Most insurers rely on homeowners to disclose the amount they want to be covered for,” he said.
“It’s a worry since homeowners may not know how to value their property and the things inside.
“In the current climate, with house prices skyrocketing and the cost of building supplies increasing, homeowners could be hit hard if they are underinsured.”
A number of properties that were inundated during Townsville’s devastating flood in 2019 were gutted and sold as shells due to their owners having no insurance or not enough to cover the rebuild.
RACQ
Looking ahead, Mr Sadlier said accurate valuations should be mandated.
He said homeowners generally were not in a position to understand the true cost of house construction, or the possible cost implications associated with any rebuild requirements after a disaster.
“We know Australia gets these weather events, and quite often,” he said.
“I just don’t understand why underinsurance is still an issue.”
>>>Tips to ensure you have adequate cover:
Keep track of your policy: Check your policy every year and make sure that it still covers you completely, especially if you’ve renovated or purchased new furniture. Your insurance may no longer cover the complete cost of rebuilding if your property value has increased.
Note your neighbourhood value: If your neighbourhood has begun to increase in value, this may have pushed the value of your house up. If so, your insurance policy might also need to increase. If your insurance policy is reflective of the property’s value when you bought it as opposed to what it is valued at today, the house is most likely underinsured.
Don’t cut corners: Another common driver of underinsurance is an attempt to save money. Some people believe a comprehensive home insurance policy is too expensive, but the cost of being underinsured could be far greater down the track if an unexpected disaster means that you’re starting from square one.
Cover everything with a high replacement cost: You might have building insurance for damage to the structure of your property, but some people choose not to cover their contents. You might not think that you have much of particular value, but consider the cost of replacing every single thing in your house, such as in the case of a fire or a flood, and it really adds up. For instance, people might forget to include the price of fittings, carpets or curtains.
(Source: Finder )
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