The council estimates that 10 per cent of householders deliberately understate the cost of replacing their home to lower their insurance premiums.
"A lot of people think that rebuilding costs are the same as the market value of their property,"Marty Sadlier,founder of MCG Quantity Surveyors,said.
"However,rebuilding costs can be much higher as there are other costs to factor in – such as demolition and debris removal,building approvals and,depending on location,bushfire building codes – that can dictate how you rebuild the property,Mr Sadlier said.
A spokesperson for the council said it was important to keep one's insurance policy up to date,particularly if one has renovated.
Two reports on building insurance released by the Australian Securities and Investments Commission (ASIC) in October 2014,found that consumers often asked insurers about how best to estimate the sum for a house to be fully insured.
"However,most insurers have adopted a'no advice'or'factual information'business model,which means they do not provide consumers with the information or the advice they[need],"ASIC said.