Ensure your home is covered for its reconstruction value.

Underinsurance clauses are based on the principle that if you pay only a portion of the premium that you should be paying to fully cover your home or contents, then you can only get back an equivalent proportion of any claim.

Here's how it works:

• Your true replacement costs = $1,000,000
• Your chosen sum insured = $500,000
• Percentage undervalued = 50%

Your home is partially damaged in a windstorm, and you make a claim for $250,000 for repairs. 

You'll be paid: $250,000 (full claim amount) - 50% (percentage underinsured) = $125,000 (minus your deductible)

Here's how you can avoid being underinsured:

1. Get in touch with a qualified surveyor to complete an appraisal of your property every few years. 
2. Create and update a comprehensive home contents list. Make sure you know how much your stuff is really worth.
3. Ensure your valuables are photographed and appraised. Some high value items may require extra coverage.
4. Remember to adjust your sums insured following renovations and/or purchases.
5. Review your sums insured annually, at each renewal – as the cost to rebuild has likely increased over time due to inflation.

If your home is not adequately covered and you make a claim:

• You may get paid less than you were expecting. 
• You may not be able to cover all expenses (what you were paid vs. how much you need to put out to rebuild/ repair/ replace).
• You may not be able to rebuild or replace to the same size or standards you had before.