The Christchurch earthquakes changed the face of insurance in New Zealand and ushered in a new form of home insurance called sum insured – your home is insured for an agreed fixed amount – which applies to all home owners regardless of where they live, whether Auckland, the Hawkes Bay or Stewart Island.
While sum insured is new to New Zealand, our country enjoyed the privilege of being one of the few, if not the only nation, where the sum insured rules did not previously apply (until now, home insurance was based on open ended insurance, which means you could insure to replace to an agreed size, rather than an agreed amount).
Essentially, however, sum insured means that your home may still be insured for what it’s worth.
The only difference is that you have to determine its worth before you begin the policy, and it’s critical that you make sure you have the value correct.
There are three ways to determine value:
1. You may accept the default home value calculation provided by your insurer.
However, numerous media articles and studies have determined that going with your insurer’s default amount may leave you significantly under-insured.
2. You may use the Cordell rebuilding cost calculator (adapted from Australia), but even community organisation Cancern warns that homeowners should not rely on the calculator.
Cancern’s Leanne Curtis told the New Zealand Herald: “Unless people get qualified quantity surveyors in, they are going to miss something. A bigger concern is that people don’t really understand enough about what their insurance covers.”
You can use a specialist property valuer (good enough for most homeowners) and or building or quantity surveyor services to get a true estimate of how much it will cost to rebuild your property.
A valuation may cost between $400 and $600, but it is essential you understand the true value of your property, and it is not as easy at it seems.
For example, if a house cost’s $300,000 to rebuild in one part of Auckland, it could cost $320,000 to rebuild in another part of Auckland because of access issues or building materials. That’s why it is important to be know your own situation thoroughly.
If you want advice one what might be the best way forward for yourself, feel free to give me a call on 021 889 413 or send me an email via our contacts page.