Home insurance. It’s something we’re told we all need, but it can be frustrating when you’re having to fork out large chunks of money every year for something that might not even happen. But if that something does happen, are you protected/protected enough?
The Actuaries Institute’s Home Insurance Affordability report warns that a lack of insurance affordability doesn’t just pose a risk to households, but also lenders and governments.
The number of Aussie households struggling to pay for their home insurance premiums has jumped more than 30 percent in the 12 months leading up to March 2024*. This poses a real concern to insurance affordability overall.
An “affordability-stressed household” is classed as a household facing insurance premium costs that are equal to or more than four weeks of gross household income. In March 2024, this equates to 1.61 million households. These households also spent, on average, more than 9 weeks worth of gross household income on their home insurance.
The increase in these figures can be largely contributed to the surge of insurance claims made during the past year, particularly in regions threatened with increased risk of natural disasters.
However, there are other factors that also contribute to the increasing costs of home insurance premiums. These include things such as insurer expenses, profit margins and the cost of reinsurance (where the insurer transfers all or part of a risk to another insurer). The increased costs associated with rebuilding or repairing homes can also contribute to rising costs.
In the current economic climate, insurance can be viewed as a “luxury” item in the budgets of many households. Something that can be cut back on, or forgone altogether, in order to save money for more immediate necessities such as groceries, utilities and housing costs. But our homes can be damaged even when we don't live in high risk areas. And if you aren't insured, you could be in real trouble should something happen.
Additionally, home insurance can also be put into the “set and forget” pile as another annual cost we bear. But it’s important to remember that not only do property values fluctuate, so do rebuilding and repair costs. What was a suitable insured amount at the start of your policy may not sufficient five, ten or twenty years down the track. If you don’t ensure that your insured amount is enough, you could be left with quite a shortfall should that “something” happen.
If you’re not sure if you’re home is appropriately insured, your insurer will likely have different calculators on their website that you can use.
