ASIC launched a project to examine home insurance following the Canberra bushfires in January 2003 that destroyed 488 homes.

The ASIC report, suggests that Canberra homeowners affected by the fires were underinsured by between 27% and 40% on average.

Surveys suggest that at least 27% and possibly as many as 81% of homeowners are underinsured by 10%. The experience of victims of the Canberra bushfires suggests that the actual level is probably towards the higher end of this range.

ASIC said that consumers should remember some key points when considering home insurance, including:-

• even if you think you have enough insurance, you should check your level of cover, particularly if you haven't increased it for a number of years;
  
  
• online calculators are a practical way to work out how much to insure for but not all calculators are the same. The best calculators ask 20 to 30 questions about your home and take all the features identified into account in providing an estimate;
  
  
• if you think you can't afford to increase your cover, consider changing your excess and using the money saved on the premium, or shop around for the cheapest cover by using websites to obtain online quotes and compare prices;
  
  
• if you have calculated your level of cover by taking the purchase price of your property, and deducting the value of the land, then you are at risk of being underinsured. This method generally produces a figure that is too low; and
  
  
• if you are doing renovations you need to increase your level of cover. Don't wait until the next renewal.