Home insurance changes

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The insurance system is moving from ‘replacement cost’ insurance to what is known as ‘sum insured’. Sum insured means that homes are insured for up to a maximum specified amount.

It is up to the home owner to work out the cost for a total rebuild of their home from the ground up – not an easy task for most!

Why the change?

Perhaps unsurprisingly, the change has come about as a result of the Christchurch Earthquakes. The reinsurers (the global companies that provide natural disaster cover to local insurance companies) want New Zealand’s insurance system to be tightened up. They want to know the maximum cost that insurers would have to pay out to rebuild homes. The change also aligns New Zealand with the policies of other countries such as Australia, the UK and the US.

What do these changes mean for you?

If you already have home insurance, ask your insurance company when the change takes effect. It is likely the changes will apply from your next annual review date or renewal date.

If you are getting new home insurance, these changes should apply to you.

To ensure your cover is sufficient, you will have to consider factors such as: what material your home is made out of, how old it is, what type of land it is on, how big it is,  and whether there are any special features. Your insurance company may provide you with a default sum insured amount, or they may have an insurance calculator to help you calculate the correct amount.

It is important that your home is insured for the correct amount. If your insurance is too low you may not receive enough cover in the event of natural disaster. Conversely, if it is too high, you may end up paying too much in premiums.

If in doubt, consult a valuer or other qualified professional to estimate the cost of rebuild.