The aftershocks from the Christchurch earthquakes are still being felt through New Zealand. The latest is how we will insure our houses from mid 2013.
You probably don’t give house cover much thought and who needed to? Your insurance company promised to pay whatever it cost to rebuild, based on size. The only numbers you had to worry about were square metres and premium dollars. In the unlikely event your house was the one in the street that burned down, it would be restored to its former glory. The Christchurch natural disasters highlighted two key points: very few houses the same size end up costing exactly the same to rebuild, and whole suburbs of houses can be wiped out in one event.
Cue the reinsurers – those overseas companies who provide “insurance for insurance companies”. Big or small, we all need to spread our risk. The reinsurers have re-rated earthquake-prone New Zealand. You have probably already seen your premiums go up along with EQC levels. Their next change is to bring New Zealand into line with Australia, the UK and the US moving to a capped sum based on the cost to rebuild. What’s more, it’s the responsibility of the homeowner to correctly assess that cost. Your insurer may produce a default sum based on size, with many quoting $1,600 to $2,000 per m2. However, I strongly advise you to check the figure when it appears on your next policy renewal statement – because in the event of total rebuild, your insurer will pay no more than the specified sum you agreed to.
You probably know your CV but that includes land and shouldn’t be relied on as accurate regarding the structure alone. As someone who built a new house four years ago, I can confirm there are a multitude of factors to consider:
- Materials and finishing’s (quality can vary the cost hugely)
- Constructions costs
- Slope of the land
- Compliance and professional fees – councils, architects and engineers
- Other structures such as decks, patios, driveways, fencing, pool, garage
- Retaining walls and landscaping
- Special features such as solar panels, diesel generator, sewage system, water tanks, jetties, wharves, bridges, wind mills
- And don’t forget demolition and removal costs for your damaged home
Don’t guess or think you will save money on premiums by picking a low figure. A few dollars a month less on the premium might mean a shortfall of tens of thousands if you need to rebuild.
And tell your insurer if you have a swimming pool and any special features to make sure they are actually covered.
Use size as a guide only. If your house is architect designed, made of solid concrete with double height ceilings, has expansive joinery with double glazing, stone cladding, and central heating it will cost more to rebuild than a single level timber frame weatherboard home of the same floor area. While it may be obvious whether or not your house has expensive marble flooring, crystal chandeliers, and highly specified kitchens and bathrooms, be aware that even for average homes, differences in construction and cladding materials can also make a big difference to cost.
If you are by now filled with trepidation as you await your house insurance renewal letter, there is help at hand. ANZ bank has a very good online calculator that takes about ten minutes. But be armed with the dimensions of everything – your whole house area plus bathrooms, patios, decks, driveway and height of ceilings – and your postcode. The rest is fairly logical – what it’s made of, age, one or two storeys, how many bathrooms, decks, garages, and sheds.
I how much it cost me to build, and the calculator produced a fairly accurate figure including GST (make sure your insurer covers GST too). If the total cost comes as a shock, don’t leave it there. You can engage a professional such as a valuer, architect, quantity surveyor or builder. Be sure to tell them you want an insurance valuation for rebuild purposes, not a market valuation. And finally, if you renovate your home in future, don’t forget to tell your insurer the new improved “sum insured” figure.
This column by Deborah Carlyon featured on page 26 of Issue 008 of New Zealand Renovate Magazine. New Zealand's first and only magazine solely dedicated to home renovations.
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