Sum Insured

What would your home really cost to rebuild? Changes to NZ house insurance mean you need to know your sums…

Sum insured. It’s now the basis of most New Zealand home insurance polices and is imperative to get right. So what does it all mean? Insurance People expert adviser Katrina Church makes sense of it all.

How does sum insured differ to total replacement cover?
“Since the Christchurch earthquakes, most NZ insurers have changed the way their insurance policies operate and now require you to specify a ‘sum insured’ for your home. This means if your home is damaged or destroyed, then the sum insured is the maximum amount the insurer will be prepared to pay out on to remedy the damage.

Before then, you’d just insure your home on the basis of total replacement cover which was calculated on a square meter basis, often up to a maximum of $1,000,000.”

So how do work out what it would cost to rebuild your home?
“That’s the difficult part, too little and you’re under insured, too much and you’re overpaying on your premiums. While there are online calculators to help you work out the cost of rebuilding your home, they’re not 100 per cent accurate. As an alternative, and probably the best way to ensure you get it right, is to use the services of a specialist quantity surveyor or property valuer, who can provide more accurate valuations – especially if you’ve got a pre-1945 property or non-standard design.”

What about when you renew your home insurance policy?
“The need to set a sum insured each time your renew your home insurance policy is a good reminder to review all the information you’ve provided to your insurer. If you’re planning some big renovations, will be leaving your property vacant for any length of time, or any other information that may pose an insurance risk, you need to disclose this to your insurer. Forgetting to provide all the information could jeopardise your insurance cover if you make a claim on your policy.”

So how can your insurance adviser help?
“An insurance adviser is invaluable in helping you choose the right policy: guiding you through the sum insured process and getting you the right expert help if required, as well as keeping in touch regularly to make sure the information you provide to the insurers is always up to date, which is so important come claims time.”