So what's all this talk about Sum Insured?

It’s important that your Sum Insured is sufficient to cover the total cost of rebuilding your home. If your home was previously insured on a square metre basis, a default Sum Insured (based on standard average rebuild costs) will be applied and provided on your Policy Schedule contained within your annual review documentation.

You'll need to understand what your Sum Insured should cover and establish the rebuild cost of your home. If, after establishing the rebuild cost of your home the Sum Insured noted on your Policy Schedule does not accurately reflect the cost to rebuild your home.

What does this mean for my home?

Because no two houses are the same, the Sum Insured you establish needs to be specific to your property – that means taking into account what materials it’s made out of, what type of land it’s on and more. The rebuild cost of a renovated villa, an architecturally-designed home or a 1960s brick and tile house is unlikely to be the same, even if they have a similar floor area.
That’s why it’s very important that your Sum Insured is sufficient to cover the total cost of rebuilding your home. If it’s underinsured it could mean that in the event of a loss that requires the complete rebuild of your home (total loss), you’re not covered for the full cost of rebuilding your home. On the other hand, if the Sum Insured is far greater than the cost of rebuilding, you could be paying a higher premium than necessary.

Why the change?

After a number of large-scale natural disasters in New Zealand and around the world, international reinsurers want to better understand their risk and have reviewed their terms and costs for providing cover. This has driven the change to home insurance policies moving to a dollar figure (Sum Insured) basis.

How much Sum Insured cover do I need?

It is important you establish a Sum Insured for your home as you are best placed to ensure this is sufficient to cover the full rebuild cost of your home in the event of a total loss. However, when you receive your schedule at your annual policy review you’ll notice your home – if you’ve previously had area based cover – will have a default Sum Insured*. This has been calculated by using an average cost to rebuild a standard house in New Zealand ($2000 per square metre of living area and $1000 per square metre of non-living area) and applying that to the floor area you’ve previously provided for your home.
However, using the average rebuilding cost may not be appropriate in every case. It may be too high or too low depending on a wide range of factors. So it’s important that you establish a Sum Insured to cover all the costs associated with rebuilding your specific home, including garages, decks and other elements of your property.

Need some further help?

If you're unsure on the amount to cover your home or want a second opinion, we recommend getting a qualified Quantity Surveyor to come an assess your home and provide a more accurate figure.

We're happy to recommend someone so give us a call on 0508 THE MARSHALL (0508 843 627).

Most insurance companies will have full details on their website about these changes, but we've found a good one in plain english! Visit www.needtoknow.org.nz


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