If your house is destroyed
Is your house insurance enough to rebuild if the worst happens? Vero insurance has a way to make sure you don’t end up with half a house, says Laine Moger.
9 March 2022
The cost to rebuild your house might be a lot higher today than it was a year ago – and Kiwis’ insurance policies might not be keeping up with the rising costs of construction.
When we insure houses, many of us underestimate – or don’t consider – how much money it might take to rebuild our homes, says Sacha Cowlrick, Executive Manager Consumer Insurance for Vero.
“Everyone knows how much they can sell their house for, but how many people know how much they can rebuild it for? It should be common knowledge, but it isn’t for a lot of people,” Cowlrick says.
This is particularly true of late, with Covid-19 creating supply chain issues and labour shortages that are putting pressure on the building industry. Now more than ever, people should be checking their sum insured.
Use a calculator
Following the Canterbury earthquakes, most of the insurance industry moved to ‘sum insured’ house insurance policies.
Homeowners are now responsible for setting the sum insured – essentially the total amount the insurer will pay if the house is destroyed – on their insurance policies.
But, says Cowlrick, many people are treating their house insurance as ‘set and forget’.
Vero has been progressively analysing its portfolio against CoreLogic data and found that at least a quarter of its customers might not have enough cover. It is contacting customers it finds who may be underinsured to encourage them to check their sum insured.
“Homeowners are responsible for getting an estimate of how much it would cost to rebuild their house, and using that estimate to set their sum insured,” she says.
“It’s relatively easy using a registered valuer or an approved online calculator, and it makes it more likely you’ll have the right cover if the worst should happen.”
Kiwis aren’t taking advantage of
Vero’s latest ad campaign is reminding its customers that they could have extra cover available to them, including full replacement cover for damage from a fire – if they are meeting certain conditions, says Cowlrick.
To qualify, you need to work out the estimated cost of rebuilding your home using approved calculation methods, like the Cordell Calculator on vero.co.nz, or by using a registered valuer.
“If Kiwis are using those tools to set their sum insured, they’re more likely to have the right amount of cover,” she says.
“And offering the peace of mind of a little bit of extra cover is one way for us to encourage people to take the time and make sure they have the right sum insured.”
Under its policies, qualifying Vero customers are eligible* for 10% extra cover in a natural disaster, or full replacement cover for any other accidental damage, if they have set their sum insured based on an accepted rebuild estimate within the last three years.
It might pay to double-check at least annually, even if you think you’re correctly insured, says Cowlrick.
Investors, take care
Cowlrick says with travel restricted by Covid-19, it seems that New Zealanders have taken to home improvement in a big way.
Property investors or DIYers should be especially careful to make sure they have the right amount of insurance cover if they’re improving, upgrading, or adding to a house.
“Insurers can access only limited data on the homes we insure, but the people who know those houses the best are the people that own them,” she says.
“If you’re making improvements to your house, it’s likely to change how much it would cost to rebuild it so it’s important that you re-check your sum insured at that time, ideally using a registered builder or quantity surveyor,” she says.
You can contact your insurer, broker, or adviser to update your sum insured amount at any time.
And Cowlrick says if you’re a Vero customer and have a record of a rebuild estimate that is less than three years old, you’ll be eligible for the SumExtra benefit if you need it – just like that.
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