Case Study: Underinsurance sees elderly couple homeless

Thelma and George Abrahams*, an elderly couple who owned their own home in a Sydney seaside suburb, thought they were diligent about insuring their home. Every year they renewed the policy and paid the premium.

But that was all they did. Thelma and George did not consult a broker and get professional advice on the real value of their home. Every year they also left the contents value at the same amount as it had been the previous year, and the year before that.

One evening, while Thelma and George were at the bowls club, their house caught fire. It was severely damaged. When they arrived home as the fire brigade was cleaning up the site, Thelma and George were horrified. But at least they were insured, they thought.

However, a perusal of their cover found the couple’s home was insured for only 75 per cent of its value and the insured value of their contents was around half the replacement value.

Thelma and George couldn’t afford to rebuild their home, but had to sell the land and move to rented accommodation.

Professional advice would have saved them much heartache. A broker would have advised Thelma and George to minimise the risk of underinsurance by considering the full cost of rebuilding, including removing debris. The couple also would have been advised to do an annual inventory of their contents and check out the prices for new goods. Contact an IBNA broker today to discuss your insurance requirements.

(* Names have been changed to protect privacy). 

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