Consumer group Choice has examined the effectiveness of online insurance calculators designed to prevent consumers underinsuring their homes.

Choice tested six calculators and found they can deliver vastly different outcomes for identical four-bedroom properties in the same suburb or postcode – by as much as $71,500.

The different rebuilding costs occur because insurers have their own methodologies to run the numbers, Choice says.

Factors such as demolition cost, professional fees and debris removal are calculated differently, and make a huge difference to how the estimates turn out.

Even when these are included, insurers assess the cost differently.

In cases where the quotes are lower, it is likely the estimates have not included demolition fees, architects fees and alternative rental accommodation expenses while the rebuilding is going on.

“The insurance company calculators that gave higher totals in our test included these fees. If your house is destroyed, you will want your insurance to pay these costs,” Choice says in its latest magazine.

Locations matter too. It can cost twice as much to build the same house in the NT than in NSW.

In the Choice test, the CGU calculator estimates it will cost around $380,942 to rebuild the four-bedroom house in NSW and $841,067 if the same dwelling is to be constructed in the NT.

Quotes from other insurers including GIO, Budget Direct and QBE produced large differences between the two locations as well.

Despite the discrepancies, online calculators have a role in helping consumers avoid under-insuring their properties, the Insurance Council of Australia says.

“These calculators provide reliable guidance on the amount of insurance that householders may choose to purchase. Consumers may also use them to check their level of cover,” an ICA spokesman told insuranceNEWS.com.au.

“This is a sensible step taken by insurers to ensure their customers are provided with up-to-date guidance.”

Estimates vary because the calculators have been customised to each insurer’s underwriting standards and other criteria.

“Cost estimates can also vary because different insurers have their own arrangements, such as using panel builders, for rebuilding or repairing properties, or they may not fully cover demolition and other costs,” the spokesman says.