Does your house insurance policy cover a total loss?

After the Christchurch earthquake many insurance companies changed their house insurance policies from “full replacement” cover to “sum insured” amounts. This meant that if your house was damaged or destroyed, your insurer would pay the sum insured amount, rather than cover the costs of a full replacement.

Homeowners should be aware that, with inflation now at roughly 7% and the costs of building skyrocketing, if your house insurance is a “sum insured” policy and you have not reviewed that sum insured amount in the last few years, you may well be under-insured.

It’s a good idea for all property owners to check your house insurance policy, and consider:

1. What is your “sum insured” amount?
2. Is that amount enough to rebuild a similar house of the same quality in the current market?
3. Does your sum insured amount include costs of demolition, preparing the site for rebuild etc?
4. If not, are you comfortable with that?

If in doubt, contact a valuer or quantity surveyor to obtain an insurance valuation, which you can then provide to your insurer to confirm your “sum insured” amount. We recommend using a valuer or quantity surveyor who is registered with the Property Institute of New Zealand (valuers) or the New Zealand Institute of Quantity Surveyors.