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New Zealand insurers require homes to be covered up to a specified amount so they know the maximum they may need to pay to rebuild your home in the event of a total loss.
This amount is known as the home 'sum insured'.
The sum insured is based on how much it would cost to completely rebuild your home to existing size and quality. It does not include land value and is not based on market value, or what you paid to buy the house.
It's important you correctly calculate the amount needed to rebuild your home. If you set the sum too low, it could be the difference between rebuilding a two or three-bedroom home, or having no deck or garage. Would you be able to find the extra money to complete your home if you'd underestimated the cost of a rebuild?
Your home's sum insured needs to include costs such as labour, materials, demolition and removal of debris, consents and fees associated with rebuilding and repairing the home. You may also need to account for items such as retaining walls, swimming pools, tennis courts and bridges etc, depending on your policy and any specified sub limits.
You are responsible for setting the sum insured for your home insurance policy.
The Cordell Sum Sure calculator is a great starting point if you want to estimate sum insured for your home. This is a free and easy to use online tool and includes tips to help you through the estimation process.
However, a rebuild valuation from a registered valuer or quantity surveyor is the best way to ensure a more accurate sum insured figure for your property. There are costs involved in engaging these professionals.
It's important to keep your sum insured amount accurate and up to date. A great time to do this is when your policy is up for renewal, or as soon as you’ve renovated or added value to your home.
For most people their home is their largest asset, so it's vital to have the right home insurance policy and ensure the sum insured amount is accurate.
Your broker can help explain the process for setting your sum insured, and will regularly review your home insurance policy to ensure it still meets your requirements.