How can you make sure your home is properly insured?

04 August 2016

Are you one of the 84 per cent of New Zealanders who would not have enough money to rebuild your home if it was destroyed in a fire, earthquake or other disaster?

The Treasury of New Zealand1 reported recently that most Kiwis underestimate how much they need to insure their homes for - by as much as 28 percent. For example, this would work out to approximately $140,000, on a $500,000 home.

Sum Insured - a new regime applied by most major insurers - means that your home is insured for an agreed fixed amount. It is up to the homeowner buying the insurance to determine how much they value the home’s rebuild estimate to be in the event of a total loss or disaster.

Most homeowners getting their sum insured wrong

"Half of respondents would rather have flights and accommodation for a mystery break (55%) or $1,000 gift card from their favourite store (54%) instead of a year’s worth of life and income protection insurance." - Therese Singleton

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"Although there are online tools and information to guide customers, ultimately it is up to you, the homeowner, to determine what your house is worth. From the Treasury report information, it appears that most homeowners still do not have enough insurance cover in place," said AMP's Head of General Insurance, Rob Dibley.

The Treasury of New Zealand report, “Sum Insured'' cover for household insurance - what are the risks?1”, said that homeowners are put off by the cost of getting a detailed rebuilding cost valuation, and that online 'sum insured' calculators can only be as accurate as the information provided.

Accuracy, 'too hard factor' and cost stymie homeowners

Mr Dibley said that part of the problem is the accuracy of the information that homeowners have about their property, and sometimes it can be a hassle accessing the right information, or if the information supplied is not specific to the home or is not correct.

"As the Treasury report rightly points out, if you're at all unsure and want to review your sum insured, it's relatively inexpensive to increase your insurance cover - about $3 per week for an additional $100,000 (if you live in Auckland) - to increase your insurance cover," he said.

Two ways to value your property

If you don't want to leave your home insurance level to a 'best guess' scenario, there are a couple of ways to assess the value of your home:

  1. Use the Cordell Sum Sure calculator to estimate the rebuild cost of your home
  2. Engage a registered valuer, registered quantity surveyor or a building practitioner holding an appropriate trade licence for an estimate to rebuild your home. 

"People forget that if you live in a difficult to access area, or outside of a major town or city, it's probably going to cost extra due to additional labour and additional building requirements. Such factors add to the cost of repair or building," Mr Dibley said.

Get a rebuild cost estimate

Use the Cordell Sum Sure calculator which gives an estimate to rebuild cost of your home

 

Mr Dibley added that AMP has a benefit for its Maxi Home insurance customers called SumExtra, which is a top-up cover that makes their home insurance go further. If the required criteria is met, it provides extra financial help at claim time if the cost of rebuilding their home is even more than their sum insured.

GST, topography and transport could add to the cost

"Have you factored in the GST that you will have to pay on materials and building costs? How will the topography add to the cost of your rebuild. Then there's transport costs - all of these factors could mean that your level of insurance is woefully inadequate. It’s also interesting to note that only a few products, including AMP’s exclude GST when paying out to the sum insured value. After all, 15% could mean a lot in the scheme of things."

Mr Dibley said that if anybody is unsure or worried that their insurance might not be enough to cover the cost of repairs or a rebuild, they should speak to an Adviser.

"The first stage in establishing your sum insured should be the online calculators provided by insurers; however if you are still unsure at that stage I would also suggest that you go through the extra expense of hiring a professional to estimate to establish the true replacement cost of your property," he said.

Want to know more about
Sum Insured?

Watch this video to find out more about what Sum Insured means for your home insurance and why it's important to get it right.

Important information

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1'Sum Insured' cover for household insurance - what are the risks? Published 9 May 2016. Treasury Staff Insights: Rangitaki article by James Sergeant.

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