Calculating House Insurance: Nz Guide

Calculating house insurance in New Zealand involves determining the sum insured, which is the maximum amount your insurance company will pay to rebuild your house if it is damaged or destroyed. This can be tricky to get right, as it should include various costs such as demolition, debris removal, professional fees, council fees, and the cost of construction materials. To help with this process, several online calculators are available, such as the Cordell Calculator, which uses council construction data to estimate the rebuild cost. It is important to review your sum insured regularly, as building material and labour costs can increase over time, and ensure your insurance covers natural disasters, which are the most common cause of total house losses in New Zealand.

Sum insured vs. replacement policy

When it comes to house insurance in New Zealand, there are two main types of policies: sum insured and replacement policies.

Sum Insured Policy

In a sum insured policy, you and your insurance company agree on a total sum that your house is insured for. This is typically based on the cost of rebuilding your home, excluding any special features, and should be regularly reviewed to ensure it is up-to-date with the current construction costs. If your house is destroyed, your insurance company will pay to rebuild it up to the sum insured, regardless of the actual cost of rebuilding. It is important to note that the sum insured should not be based on the market or rateable value of your house but should reflect the potential cost of rebuilding.

Replacement Policy

A replacement policy, on the other hand, means that your insurance company will rebuild or repair your house up to the total number of square meters insured, paying all professional fees and demolition costs involved. This type of policy does not have a sum insured limit, and the insurer will bear the cost of rebuilding or repairing, even if it exceeds the sum insured.

Key Differences

The main difference between the two policies is that with a sum insured policy, the onus is on the homeowner to ensure the sum insured is sufficient to cover the cost of rebuilding. If the sum insured is too low, the homeowner may have to compromise on the size or quality of the rebuilt house. On the other hand, a replacement policy provides more flexibility, as the insurer will cover the full cost of rebuilding, regardless of the sum insured.

Christchurch Earthquakes Impact on Policies

Prior to the Christchurch earthquakes, most policies in New Zealand did not have a sum insured limit, and insurers simply paid to rebuild houses to their existing size. However, after the earthquakes, insurers began to use sum insured limits to better estimate their risk in the event of a significant disaster. Today, some insurers are bringing back the uncapped replacement policy, but only for fire-related incidents.

In conclusion, while both sum insured and replacement policies offer protection for your home, it is important to understand the differences between them to ensure you have adequate coverage. Regularly reviewing your policy and sum insured amount is crucial to ensure you are not under-insured in the event of a total loss.

Calculating the rebuild cost

There are several steps you can take to calculate the rebuild cost of your house:

• Choose your policy type. Your home insurance cover and cost will vary depending on whether you are an owner-occupier or landlord, and whether you want cover for your home, contents, or both.
• Gather basic information about your home. This includes the type of building (free-standing, semi-detached, apartment, townhouse), the materials used in construction, and when it was built.
• Obtain a few extra details. Take note of the architectural style, the number of levels and rooms, the accessibility and slope of your land, and any features such as outbuildings, garages, carports, sheds, driveways, retaining walls, swimming pools, or tennis courts.
• Measure the area of the building. Determine the floor area of your home in square meters, as this will affect rebuilding costs.

You can then use an online tool such as the Cordell Calculator to estimate the rebuild cost of your house. This tool uses council construction data to calculate a rebuild estimate, taking into account your house’s size, building materials, demolition costs, and age. It is available for over 99% of New Zealand houses.

Alternatively, you can contact a registered valuer, quantity surveyor, or other approved building practitioner to get your rebuild costs professionally estimated. This may be particularly important if your home is a custom, architecturally designed, or high-spec build, or would exceed $2.5 million to rebuild.

Using the Cordell Calculator

The Cordell Calculator is an independent online tool that uses council construction data on your house to calculate a rebuild cost estimate. It is available for over 99% of New Zealand houses.

To use the Cordell Calculator, you will need to enter your address and check that the information is complete and accurately describes your home. You will need to review and possibly update information such as:

• The number of storeys your home has
• Whether it is built on flat or sloping land
• The materials used, including flooring, walls and roof materials

The calculator will then provide you with an estimated rebuild cost based on the typical rebuild costs for homes with similar materials and features. This estimate can be used to set the Sum Insured on your house insurance.

It is important to note that the Cordell Calculator does not take into account individual design features, site-specific conditions, structural conditions and materials, local planning laws, or any other regulations. Therefore, it may not be suitable for all properties. If your home has significant special features, was built to a superior standard, is very large, or has a high value, you may need to contact a registered property valuer or quantity surveyor for a more accurate estimate.

You should also keep in mind that rebuilding costs can fluctuate, so it is recommended to review your Sum Insured regularly to ensure you have enough cover.

Contents cover

Contents insurance is a great way to protect yourself and your property against the unexpected. Here are some things to consider when choosing your cover:

Understanding Sum Insured

It's important to understand what 'sum insured' means in the context of insurance. Correctly estimating your sum insured and reviewing it regularly will help ensure you have enough cover for your needs. The sum insured (or replacement value) should equal the cost to fully rebuild your house to its current size, using today's building costs. This includes the cost of building materials, demolition, and labour. It's important to note that the sum insured should not be based on the market or rateable value of your house.

Calculating Sum Insured

You can use the sum insured calculator on your insurer's website or seek out independent tools to calculate the replacement cost of your home and the value of your contents. For more complex properties or to get a more accurate estimate, you may wish to engage a valuer or quantity surveyor to provide a replacement valuation.

Contents Calculator Tools

Some insurance providers offer contents calculator tools to help you break down your contents room-by-room to give you a suggested sum insured option. This is the maximum they'll pay for your contents, so you need to be sure that it's enough to replace your items at today's prices.

Contents Insurance for Renters and Flatmates

If you are renting or flatting, you only need to include the value of your own personal items, not property owned by your flatmates. You can adjust your responses to only select the rooms your belongings are in (e.g. your bedroom) and the items you personally own when using a contents calculator.

Contents Insurance for Landlords

If you're a landlord, refer to the policy document as there is limited cover in this instance. Calculate your sum insured for landlord contents separately, as it may differ from your own personal contents insurance.

Contents Insurance for Students

If your parents have a comprehensive contents insurance policy, you may be covered under it even if you live in a hall of residence in a different city. It's best to check with your parents and their insurers to confirm. If your parents don't have contents insurance, you may want to consider getting your own, especially for important items like laptops or phones.

Contents Insurance for Off-Site Items

If you have possessions in off-site storage, you should inform your insurance company. Often, you will need to take out special, short-term cover to protect any assets kept in a self-storage facility.

Receipts and Valuations

When making a claim on your contents, receipts and valuations are a good way to show what you are claiming. If you don't have a receipt of valuation, you can also use photos, financial statements, or records kept by the shop where you purchased the item.

Getting the sums right

The sum insured is the maximum amount your insurance company will pay to rebuild your house if it is damaged. It is important to get this right, as it will be the maximum you will be paid if your house is damaged beyond repair.

The sum insured should equal the cost to fully rebuild your house to its current size, using today's building costs. This includes demolition costs, debris removal, professional fees, and council fees. It is also important to include any additional or recreational features that would increase the rebuild cost, such as swimming pools, solar panels, outbuildings, and retaining walls.

There are several online tools available to help you calculate the sum insured for your house. The Cordell Calculator is an independent online tool that uses council construction data on your house to calculate a rebuild estimate. It accounts for your house's size, building materials, demolition costs, and age, and is available for over 99% of New Zealand houses. The Cordell Sum Sure Calculator is another easy-to-use tool that estimates your sum insured amount by simply entering your address and checking the property details listed.

In some cases, it may be advisable to seek the help of a professional to calculate the sum insured for your house. This is especially true if you have a house that is high value, unusual, or does not show up in the Cordell Sum Sure Calculator. A builder, architect, quantity surveyor, or other valuation expert can provide an estimate of the rebuild cost for your property.

It is recommended to check your sum insured each year, as building material costs, labour costs, and inflation are likely to increase the rebuild cost of your house over time.

Frequently asked questions