Recent sharp increases in building materials costs due to Covid shortages have affected the cost of a possible rebuild, or repair, of your home. It is, therefore, wise to have your home properly insured. Although most commercial property owners must obtain an insurance valuation at least every three years, there is seldom any requirement on homeowners to do this.
With most house insurance policies, it’s up to the homeowner to set the sum insured. If your sum insured is too low, you may not be able to repair or rebuild your home to the same size and quality in the event of damage or loss. If your sum insured is too high, you are paying too much for your insurance as most insurers will only reimburse policyholders for the actual cost of the loss they have suffered.
Tips for determining the sum insured
Professional valuation: If you want accurate and up-to-date rebuild figures, obtain an insurance valuation from a property valuer or quantity surveyor. The sum should be based on current building costs, not market value.
Online calculator: Using an online calculator (Cordell Sum Sure, for example) can be useful but this comes with a word of warning. It’s an estimate; it is not as accurate as a professional valuation. We heard a recent example where a professional valuation produced a figure almost 30% higher than using an online calculator.
Whichever method you use, the valuation should:
- Not include the cost of the land, just the property/structures built on it
- Allow for current building standards to be implemented
- Factor in structural improvements such as sheds, pergolas and fencing
- Include the cost of removing debris, and
- Include GST.
It’s up to you to check your sum insured is accurate and kept current. You should review the sum insured each year to make sure it’s still appropriate for your home.
In the unfortunate event that you experience any loss and have difficulty reaching agreement with your insurer over the value of the loss, please contact us for advice on your legal options.