RESIDENTIAL INSURANCE (from OCTOBER 2014)
From the 1st July 2013 all residential house insurance policy cover will be for TOTAL SUM INSURED maximum as specified amount by the policy holder. This will also affect farm building insurance policies. Previously policies were for an unspecified “Full Replacement” on a square metre basis.
These changes have been instigated by the international insurance companies due to the large scale of global natural disasters which have occurred in recent times, such as earthquakes, hurricanes, tornados and tsunami’s. These international insurance companies (IAG, Vero and Lumley) underwrite the majority of insurance in New Zealand.
The policy holder will now be responsible for determining the “sum insured” for full replacement of your house and other improvements on your property; such as garaging, swimming pools, fences, garages, tennis courts, sheds, retaining walls, driveway, paving and underground services; plus professional fees (architect, consent, etc.), demolition costs and an inflationary provision.
IAG have set up a website “www.need2know.org.nz”
which explains the changes. It also provides access to online calculators for assessing the likely replacement costs. Homeowners need to consider whether they are comfortable relying on these calculators which provide industry standard figures or whether individual insurance valuations should be obtained. The Cordell Calculator can be accessed by “www.cost2build.co.nz”.
If you do not provide a sum insured, then the “default” sum insured is based on the information that has previously been provided regarding the square metres of the house and a set rate of $2000 per square metre. As each home is unique, the default sum insured is unlikely to be accurate for your property.
What are the potential risks of not accurately assessing the “sum insured” for your property? If it costs more to rebuild your property than the figure you have insured it for, then you will have to find the additional funds from somewhere else, or end up with a “lesser” house and other improvements than you used to have. If you insure for a higher figure than the actual cost to rebuild, then you will have been paying for more insurance than you actually need.
We recommend that for an accurate assessment of the “Total Sum Insured” for your property, you obtain a valuation from a Registered Valuer. The insurance valuation will not only provide you with a “Full Replacement Cost” for the whole property, but also an inflationary figure and cost of demolition. Please contact Cleghorn Gillespie Jensen if we can be of any assistance to you.