Kiwis may be taking a “miscalculated risk” in not insuring their homes for the right amount – a risk which could lead to a double shock if disaster strikes.
New Zealand’s largest general insurer IAG says that homeowners are not reviewing their sum insured nearly as often as they should be, and could seriously struggle to rebuild their home if they miscalculate repair costs.
IAG’s home & contents portfolio manager Brendan McGillcuddy says there are many reasons why a sum insured may need review – changing building material costs and new compliance regulations, for example, would all push the price of a rebuild up year-on-year.
Recent QV data showed that construction costs in New Zealand’s biggest cities have increased by over 30% over the last ten years, with labour costs rising by 17% over the same period.
“The cost to rebuild is an important thing to understand,” McGillcuddy said. “It’s not the same as market value or rateable value. We really want people to know these concepts are not the same.”
“Anecdotally too, we’ve heard homeowners won’t regularly review their sum insured as they mistakenly believe increasing cover will result in dramatically higher insurance premiums,” he explained.
“We want to debunk this myth and let Kiwis know that this is not the case. For example, adding an extra $100,000 to your sum insured will result in an increased premium, but not as high as homeowners may fear.”
McGillcuddy says homeowners need to consider the materials used to build their house, the location of the property and any special features. He says it is strongly recommended to review sums insured at least once every twelve months, and to make use of IAG’s online sum insured calculator.
“It’s time well spent to understand what you are covered for and what your sum insured includes so homeowners can be adequately covered if the worst was to happen,” he said.
“At the end of the day, what you insure your house for is your decision as the homeowner, so you must know your home inside and out and that you have calculated the cost to rebuild correctly.”