COVID delivers looming insurance disaster for Aussie home owners

Marty Sadlier, Chief Executive Officer at MCG Quantity Surveyors

MCG Quantity Surveyors, a leading quantity surveying firm says Australian property owners are at immediate risk of a massive but preventable insurance blow to the industry.

MCG Quantity Surveyors said a surge in construction costs and labour has put homeowners at risk of under insurance, which means many are just one disaster away from financial ruin.

MCG Quantity Surveyors’ advice on insurance

“Property owners could be left hundreds of thousands out of pocket should an unfortunate event have them calling their insurance provider,” according to MCG director, Marty Sadlier.

“Unfortunately, most will only discover they are woefully underinsured when it’s too late.” Construction and labour cost increases over the past six months have been extraordinary.

“Our estimates indicate the cost of building an average Aussie home in capital cities such as Sydney, Brisbane and Melbourne has risen by over 10% in the past six months.”

“Given the median construction cost for homes in these cities is around $485,000 that’s a price rise of over $48,500 in half a year. But this is just an average. Many properties in inner-city suburbs have construction costs of well over $1 million.”

“The average construction program on these sites have increased by as much as an additional 16 weeks due to material and trade shortages. There are plenty of cities and towns where real costs have gone up by 15% or more for the end user once these delay costs are accounted for.”

“This only allows for construction costs. Insurance is also supposed to cover additional outlays such as professional fees, council charges levees and emergency accommodation.”

MCG Quantity Surveyors worried about Underinsurance

Underinsurance was rife across the country but current conditions are making this far worse.

“The Insurance Council of Australia are quoted as saying that prior to the pandemic, 83% of property investors were already underinsured. But given the recent hikes in materials and labour costs, I’d be surprised if we weren’t closer to 100% of owners at risk.”

Mr Sadlier said property owners can undertake a three-step solution to ensure they’re adequately covered and not disadvantaged.

“Number one – you must update your property’s insurance value regularly. At least every year. Secondly, don’t use ‘online insurance calculators’ to assess your property’s replacement cost.”

“Instances where online calculators have been more than 65% below the true replacement cost of a dwelling. Keeping up to date with the construction costs requires diligence and accuracy.”

“Use professionals, like certified quantity surveyors (CQS), to accurately confirm replacement values for insurance purposes. Finally, shop around for insurance options.”

“A hike in value can mean an increase in your premium. Make sure you use a reputable insurance broker to confirm you’re paying the right price for your insurance.”