Shakeup to homeowners’ insurance policies

Shakeup to homeowners’ insurance policies might see home owners out-of-pocket
Specify the accurate replacement costs and get the right advice says Quantity Surveying firm

AUCKLAND, Monday 22nd July 2013 – In what looks to be a significant change up for the insurance industry in New Zealand all major insurers are switching their house insurance policies to ‘sum insured’. According to Emmitt Consultants Ltd (Building Cost Management Consultants), with the onus now on homeowners (rather than insurers) to specify the replacement cost of their homes in their house insurance policies they must have an accurate understanding of the likely costs to rebuild their houses in the case of a major incident or they run the risk of underestimating the costs and being unable to afford to reconstruct their home.

House insurance has traditionally paid the sum needed to replace homes in the case of complete destruction without policyholders needing to specify an amount.

As a consequence of the major disasters that have affected New Zealand and the world over the last few years the wishes of international reinsurers, have had to keep house insurance affordable while getting a clearer view of the natural disaster risk

Consumer New Zealand has warned policy owners to be careful about the value policies are fixed at, since it often costs more to replace a house than what it is worth.

“When a policy is initially taken out or annually renewed, a homeowner will need to have a clear understanding of the likely rebuild cost so it can be written into their policy. This cost will need to include things like demolition, site clearance, services, ground requirements, landscaping and the new building code requirements before rebuilding can begin,” says Nigel Emmitt, a Quantity Surveyor and Director for Emmitt Consultants.

He continues: “There are two main ways a homeowner can assess rebuild costs: firstly utilise a professional for expert advice. Our budget cost analysis tool is at www.emmittcostmanagement.co.nz/cost-management-services/budget-cost-analysis

“Secondly, there is some confusion amongst home owners whether to consult a valuer or quantity surveyor. Construction costs are different from the cost of buying an existing home. Unlike a valuer, who assesses the (market) value of a home, a quantity surveyor provides an accurate assessment of the cost to build a home. It’s this assessment that needs to be calculated for an insurance policy. They also consider regulation changes, on and offsite requirements and qualities of finishes in their assessment.”

Certified Builders Association board chairman Dave Brown has actively discouraged his members from having anything to do with valuing homes, so Quantity Surveyors offer the best option for those homeowners concerned about getting an accurate assessment. This is especially true of custom-built homes where the quality and detail is specific to the home and designer which can affect the costs considerably.

Secondly, home owners can also use online cost calculation tools that are being provided by the insurance companies. They typically ask for things like types of areas, quantity of rooms, style of your home, fittings, decking etc., before attempting to give an accurate indication of the insurance sum.

-ENDS-

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