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10 December 2018
You’ve invested a lot of time, energy and money to get the possessions you value. Understanding the value of insurance, and just how vulnerable New Zealand is to natural disasters, you’ve sensibly gone to the effort of insuring them. Claims time is not the right time to find out about the limitation of your coverage.
You need to make sure you have got just the right amount of home, motor vehicle or contents insurance cover: too much and you’re paying more than you need, too little and you may not get a pay out at claims time.
With the recent changes to home insurance, New Zealand insurance companies require homes to be insured up to a specified amount: Total Sum Insured. In the event of a disaster, you will receive no more than the Sum Insured amount, even if the actual cost of rebuilding your home turns out to be greater. The onus is on homeowners to estimate the cost of replacing their homes correctly and to ensure enough cover is in place to repair or to rebuild their homes to the same size and quality. Ensuring rebuild costs are kept up to date is vital.
Underestimating the cost to replace assets could leave people underinsured and open to another disaster.
Underinsurance means not being insured for the true value of your asset. Some examples are:
In every case, you’re caught short. When just coping with the loss itself can be devastating enough, underinsurance leads to more stress you do not need. Would you be able to find the extra money to complete your home or afford a replacement without insurance? Settling for an item which was not quite as good as your that was lost or destroyed just doesn’t’ seem fair.
Underinsurance can happen for a number of different reasons, for example seeing insurance as a box-ticking exercise or as something that could disrupt a current policy and lead to an increase in annual premiums.
Underinsuring your home to help keep the premiums down can be false economy, especially when the cost for the right coverage may surprise you. The premium difference between being underinsured insured and being properly insured does not cost as much as many people fear.
Some people rely on market valuations for setting their sum insured, but these should not be used because they are not based on rebuild costs and will also include the value of the land.
Additional cover may also be needed for things like retaining walls, pools, special features and fences as well as demolition and removal costs.
And of course, things change over time. Industry professionals recommend home insurance is reviewed thoroughly every three to five years.
Tell us about any changes to your cover that need to be made.
At Crombie Lockwood we’re here to help you understand exactly how sum insured insurance works. We’ll guide you through the process of setting the total sum insured and compare insurance quotes for you.