How much insurance cover do I need? What is the actual cost to rebuild my house?
Insurance companies are changing the way they offer insurance cover to homeowners. Most house insurance policies provided full replacement cover where a home was a write-off, in a house fire or earthquake for example. As result of the events in Christchurch, and the effective open ended liability that the insurers found they had, they are now essentially capping their exposure by agreeing a maximum amount they will pay out to a homeowner if the house is a total loss. This is known as total sum insured or agreed sum insured. This will limit the risk for an insurer but significantly increase the risk for a homeowner, as in the instance they are under insured they will not receive enough money to rebuild their home.
It is now up to homeowners to establish how much insurance cover they need and to work out how much it may cost to rebuild their home. A property’s CV or indeed market value has very little bearing on what it will actually cost to rebuild a home.
So how does a homeowner make sure they have adequate insurance cover?
Some insurance companies have provided on-line calculators in order to assist their customers in estimating this amount. However, many have found these to be too simplistic. We have seen cases where the value produced by this method greatly underestimates the actual real world costs of rebuilding a home. This was also demonstrated by the TVNZ Fair Go program on 29 May and on Campbell Live on 27 May 2013.
In order to truly establish an accurate amount to insure a house for, a homeowner needs to engage a quantity surveyor or skilled property valuer. At Prendos we have both. Prendos clients benefit from the knowledge of our in-house quantity surveying team combined with our experienced valuers, who have been providing this “sum Insured” service for over 25 years. It is critical that current market conditions and the effect on construction rates are considered in rebuild cost calculations. For example, as a result of the Canterbury earthquakes, availability of demolition contractors are currently limited leading to a marked increase in demolition costs in other areas of New Zealand.
Recognising a homeowner will have to bear the expense of establishing appropriate insurance cover, we offer a package that is not only accurate but cost-effective. In the Auckland and Wellington regions this will normally be carried out by our valuation team. In all other regions including, Tauranga, Hamilton and Christchurch this work is carried out by our Quantity Surveyors.
This involves a Valuer or Quantity Surveyor visiting the house where they will establish a rebuild cost by:
- Physically measuring relevant building elements
- Assessing the sites difficulty and access
- Establishing the quality, size and complexity of the building
- Considering ancillary buildings, fences, driveways etc.
- Gauging demolition costs
In addition they will evaluate:
- Current construction/demolition rates from our quantity surveyors
- Anticipated escalation of construction/demolition costs
- Professional fees, compliance and consent costs
On completion of the site visit and additional evaluation a Prendos Valuer will provide the homeowner with an Insurance Valuation Certificate (also known as a Residential Insurance Certificate). If a Prendos Registered Quantity Surveyor has carried out the work they will provide a Reinstatement Estimate for Insurance Purposes. The homeowner will then present either of these to their insurer in order to formalise the “sum insured”.
To find out more about Insurance Valuation Certificates / Residential Insurance Certificates or a Reinstatement Estimate for Insurance Puposes including the standard cost click here
For an article on the subject by Director and Registered Valuer Gordon Edginton Click here