Ep. 114: The Epidemic of Underinsurance in Australia, with Marty Sadlier

In this installment of the Geared for Growth podcast, host Mike Mortlock is joined by his business partner and co-founder of MCG Quantity Surveyors, Marty Sadlier, to delve into the pressing issue of under-insurance in Australia and its profound impact on Australians’ ability to recover from disasters.

Marty joins Mike to examine recent data on under-insurance, shedding light on the growing problem affecting numerous homeowners and investors. The latest figures reveal that approximately 200,000 Australians are under-insured. However, Mike and Marty emphasize that this figure fails to include those without any insurance coverage, a staggering 23% as per the last census.

Marty highlights the escalation of construction costs in recent years, which has led to insurance replacement values lagging behind. Previously, online calculators were utilized to determine insurance levels, but Marty notes their inadequacy in capturing the unique characteristics of individual properties, and the increasing challenges in finding builders and claim processing times. These calculators often yield inconsistent values when compared to alternative calculators. Presently, insurance companies have either removed these calculators altogether or appended disclaimers cautioning that they merely serve as guides.

Amidst the mounting instances of under-insurance, Mike and Marty deliberate on the role of banks and APRA in ensuring that homeowners and investors maintain adequate insurance coverage for their assets. Marty stresses that the onus of securing adequate insurance falls squarely on the property owner, as they assume the debt for the property. He underscores the risks of under-insurance, citing tragic scenarios where individuals are unable to rebuild their homes in the aftermath of natural disasters.

Although the topic may appear drier than some, Marty offers invaluable insights into its significance. Insurance often seems like an abstract expense until it becomes indispensable. Marty is dedicated to ensuring that when the need arises, your insurance will ensure that you get back on your feet fast.

Here at MCG, we are passionate about creating a forum and education series for property owners and investors. We do depreciation differently, and offer a set rate for Replacement Cost Estimate reports. A first in the industry. Join our clients saving more on their tax today https://www.mcgqs.com.au/

Marty’s Data Featured on the News

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Mike Mortlock is joined by his business partner and co-founder of MCG Quantity Surveyors, Marty Sadlier, to delve into the pressing issue of under-insurance in Australia and its profound impact on Australians’ ability to recover from disasters.

• Data from the Insurance Council of Australia regarding levels of insurance
• The role of banks and APRA in ensuring mortgagors hold adequate insurance
• The problem with construction costs outpacing inflation and insurance values
• The methodologies that people employ to determine replacement values
• The impact of the loss of builders on the time lag of rebuilding
• The loss suffered when homeowners can’t rebuild extends to the community
• Making sure insurance is fit for purpose
• Why you need to engage a Quantity Surveyor to ensure you are adequately insured

“Under insurance is when your insured value that you have down for the reinstatement of your property is X but if it’s under insured it’s that you haven’t got the full cover” 1:50

“The reality is that not everyone has insurance either so of the insured people that are 83% so the ABS also released that on the back of the last census, that 23% of all Australians have no insurance at all” 3:38

“The vast majority of people were using an online calculator to come up with what the cost was and they found that reasonably simple because you select from a couple of dropdowns and you can come up with that value but the problem is it doesn’t truly reflect what you have on your property, your location in regards to say tree lined streets or all those kinds of nuances that can really vary a construction cost” 6:40

“That can really mean ‘can I replace my property or not’ and I for one haven’t gone through such a tragic event and a large sort of event in my life but I certainly wouldn’t want it to be coupled with also financially not being able to get back into a house” 14:30

“I think the effort of understanding what is in your policy and how your exposure or potential to risk exposure is” 16:07

“The reality is if people were insured for the right amount and we had more people insured our premiums would be lower” 19:34

“We’ve just spoken about how there are people still in caravans and camper trailers and living rough or in temporary and crisis accommodation because of bushfires two years ago so we have to allow for that time of assessment” 24:11

“There would be certain things that councils are now saying you have to have which you won’t have had before so there’s an additional cost that comes with that” 27:22

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