16 May 2016
Insurance & Financial Services Ombudsman Karen Stevens is urging homeowners to check that the amount they are insuring their house for will be enough to rebuild it in the event of a disaster.
Last week Treasury released a report saying New Zealand households could be underinsured by up to $184 billion.
“One really important difference, when house insurance policies changed to ‘sum insured’ after the Canterbury earthquakes, was that the responsibility immediately transferred to the homeowner. It is now up to you to make sure the amount you are insuring your house for is enough to rebuild it,” says Karen.
The IFSO Scheme receives a number of enquiries and complaints from people who don’t understand what sum insured means. It is the maximum amount an insurer will pay if a house needs to be rebuilt. “In one complaint, out of Christchurch, a homeowner was underinsured by about $900,000. He unfortunately didn’t understand that the sum insured would only cover him in the event of a total loss up to the maximum amount set out in the policy.”
Karen says now is the time for homeowners to follow these steps:
1. Read your house insurance policy carefully
2. Check that the square meterage of your home and other buildings on your property are recorded accurately
3. Check that additional features of your home have been identified – this includes fences, driveways, garages, sleep-outs, sheds, retaining walls and swimming pools
4. Answer the questions on your insurance company’s online calculator
5. Ask a builder or quantity surveyor for their expert advice.
“With sum insured, it is so important homeowners understand their policies. Keep asking questions and make sure the insurance cover is right for you,” says Karen. “What you need to take into account is the cost of clearing your section, demolishing and then rebuilding your house. Don’t forget to include architect’s fees and other professional costs. If you have access issues to your property or a home with special features, you should expect your sum insured to be higher than average to reflect the extra costs of rebuilding your house in the event of a total loss.”
See our Sum Insured info sheet