Is your home adequately insured for the current economic environment?

We’re all aware that the economy is experiencing challenges. Recent research from Nature (2022)¹ revealed that everyday Australians are spending 22 per cent more on groceries and 20 per cent more on utilities, while reducing their spend on travel and entertainment. But while our attention is focused on household bills and grocery spending, an overlooked concern is the rising cost of building supplies.

Why is the cost of building supplies rising?

We think that there are a number of factors at play. Firstly, the Queensland and New South Wales floods have seen demand for materials like timber and steel soar, as the government works to repair and rebuild over 5,000 homes. This has also placed a strain on labour supply. Secondly, the war in Ukraine continues to disrupt global supply chains, too, creating the perfect storm for a supply crisis – and a potential nightmare for homeowners that need to repair or rebuild their homes.

How the cost of building supplies impacts your home insurance

Building and contents insurance policies are there to help protect you in the event of loss or damage as a result of an insured event. But the rising cost of building supplies means you could be unknowingly underinsured.

Most home insurance policies cover a policyholder up to a predetermined financial limit known as the sum insured. This represents the maximum amount that your insurer will pay in the event of a claim. Generally, this amount should represent the realistic replacement value of your current home.

However, with building supplies costs on the rise, home insurance policies could be set up with a sum insured that’s significantly lower than the real time costs of rebuilding in this challenging economy.

What happens if your home rebuild costs more than your sum insured?

If your sum insured falls short of the real cost of rebuilding after an insured event, you may have to make up the difference. With disposable income already in a pinch at the hands of rising prices, paying a large insurance shortfall is less than ideal. Luckily, you can review your policy and make sure that you’re adequately insured for today’s building prices.

See if your insurance measures up

Take this as a reminder to check your building insurance policy. Calculate how much it would roughly cost to rebuild your home in today’s pricing using Bendigo Bank’s handy calculator, and then see how your sum insured measures up. Then, do the same for your contents. This handy home contents calculator can help you get an estimated figure.

For information about the suite of building and contents policies that Bendigo Bank can arrange, contact our dedicated insurance team by calling 1300 557 155 between 8am–8pm (AEST/AEDT) weekdays.