The use of online valuation calculators could result in thousands of Australian property owners under-insuring their homes by a huge margin.
New research by MCG Quantity Surveyors claims that some owners could be underinsured by up to 66%, heightening the risk of financial losses as Australia lurches into bushfire and flood season, reported 9News.
The findings follow a review of web-based calculators by MCG against a detailed professional cost estimation of a home in Sydney.
A professional valuation was made on a property, which assessed the construction cost plus sums for demolition, removal of site debris and consultant’s fees to be A$668,559 ($458,500). Information for the same property was then plugged into five online home insurance calculators which different sums.
Mr Marty Sadlier, director of MCG, said the difference between the professional estimation and the web-based calculator was hundreds of thousands of dollars.
“The lowest value calculator assessed the insurance value at A$226,160 – or 66% below the needed amount, while the highest web-based estimate was A$535,000 which is still 20% underinsured,” he said.
“Not only do these calculators tend to under estimate construction costs overall, most don’t include amounts for demolition, debris removal, cost escalations and consultant’s fees.”
Mr Sadlier said, “These erroneous calculators continue to be recommended by insurance companies and even government departments, despite long-term evidence of their failings.”