November 8, 2022 Julie Hyslop

Future Proofing Your Home and Finances

Future-proofing is the process of anticipating the future and developing methods of minimizing the effects of shocks and stresses of future events.

https://en.wikipedia.org/wiki/Future-proof

Reading the recent federal budget, the term ‘Future Proofing’ was applied to the strategies that were to be implemented to ensure the nation is protected against whatever the future may bring. As individuals we could take this term and apply it to our homes, finances, and lifestyles too, developing strategies to future proof against the inevitable ‘shocks and stressors’ that will arise.

One of the most obvious strategies in Future Proofing our homes is Insurance, however while this sounds straightforward it is worth noting that when it comes to insuring our homes and buildings, replacement construction costs have risen by 12.3% over the 12 months to September 2022. This has resulted in close to 80% of homeowners being under insured.

To Future Proof against under insurance, a good place to start is to accurately calculate your replacement building costs and reassess annually. Insurance companies provide online Building Insurance Calculators that will estimate the cost of rebuilding your home based on data that they have received from recent sales and construction in your suburb or region. Also, it is worth investigating total replacement cover or ‘safety net’ cover, as while this may be more expensive it will allow for fluctuations and changes in replacement costs.

Understand and check exclusions, homes insurance covers loss and damage caused by defined events, such as fire, flood, storm, or vandalism. However, it may not necessarily cover landslides, sea damage or power failures. Future Proof by reviewing your policy and knowing how much your excess is (the amount you pay if you make a claim on your policy) and make an assessment whether it would be best to pay more to have a lower excess or pay less to have a higher excess.

Future proofing our home does not stop with house insurance, as it is worth noting that 67% (6.2 million) households are homeowners. 32% without a mortgage and 35% with a mortgage. Having a mortgage on your house will obviously require you to pay monthly repayments, but even without a mortgage you will still need to cover maintenance, rates and running costs. Income Protection Insurance may be the perfect solution to Future Proofing your income against the stressors caused by accidents or illnesses, which can result in people not having the ability to earn an income and pay their mortgages and maintain their homes.
https://www.incomesolutions.com.au/keeping-financial-calm-when-your-health-is-under-threat/

While the concept of future proofing is outlined when it comes to our homes, it can also be applied more broadly to our finances. By working with the support of a qualified financial planner and focusing on what you can control, staying invested, accepting volatility, and understanding the importance of diversification, a financial future that is future proof is possible.

Referenced for this article:

https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure
https://insurancecouncil.com.au/resource/know-your-worth-and-avoid-underinsurance/
https://moneysmart.gov.au/home-insurance/choosing-home-insurance
https://www.corelogic.com.au/news-research/reports/cordell-construction-cost-index

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