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Home insurance changes

Are you aware of the major changes which have taken place in the last couple of years in home insurance? It’s been the end of an era for the traditional ‘replacement cover’ so popular in New Zealand. Coming in the wake of the spiralling costs of the Christchurch rebuild, insurance companies vowed to always be sure of their maximum exposure, something they could never be certain of without a declared value on an insurance package. Policyholders now do the estimating and therefore carry the risk of getting it wrong. Too much cover and you’re overpaying your premiums, too little and times will be tough or even impossible in the event of a claim.

So how on earth do we as a homeowners work out what to be insured for? According to insurers it’s simple. They’ve created online calculators into which you plug the rough specs of your home, and they then generate a figure representing the likely cost of a rebuild. The clear positive is that the calculators are free to use, however a homeowners’ lobby group is warning people not to rely on them, as lengthy disclaimers mean there’s no-one to turn to if the worst happens and you end up under-insured. Since the alternative is to pay a professional valuer or quantity surveyor between $500 ad $2000, most policyholders are likely to take the easy and free option of the calculators.

If you’re using the online calculators, then think carefully about areas that could add extra costs – do you have a high stud height, top quality fittings or unstable land, all of which could add significant extra cost to a rebuild scenario. If you are calculating the costs, and realise that the process doesn’t account for a significant feature of your home, then it’s best to play it safe and employ a professional. The long-term thinking on your insurance also needs reviewing in line with the amendment. Some handy hints for capped insurance policies include:

  1. Review your house insurance annually to account for inflation, renovations or council building code changesHome insurance changes
  2. If a natural disaster causes building costs to spike, your cover will need checking
  3. If you have any building work done on your property, ask the builder for a schedule of materials used and the cost to help you value the rebuild cost