Rapidly rising building costs and changes to policy wording mean Kiwi homeowners are uninsured by an average of 28 percent – according to an industry expert.
Jo Mason CEO of NZbrokers, New Zealand’s largest insurance broking collective, says a spate of recent natural disasters has highlighted the need for homeowners to contact their broker and check what amount their home is covered for carefully.
“In the past six months we have had several devastating flood, fire, seismic and adverse weather incidents around the country.
“It is crucial that homeowners are aware of what it would cost to rebuild their house from scratch and review this regularly,” she says.
Mason says that changes to sum insured insurance policies could leave homeowners under-insured.
“Sum insured policies limit the maximum amount your insurer will pay in the event your home is totally destroyed.
“In an environment where building costs are rising at around 7-17 percent each year, there is no guarantee that the amount you are insured for will be enough to cover the cost of a total rebuild.
“What this means is that a house which cost $500,000 to construct just two years ago could be up to $185,000 more to rebuild today. Effectively the risk of the rebuild cost being greater than the insured value is borne entirely by the policyholder,” she says.
Mason says a recent Treasury report estimates that up to 85 percent of homes could be underinsured by an average of 28 percent.
She says as building prices across the country have risen by up to 17 percent, there is an urgent need for homeowners to check they are insured for the full replacement cost of their house, not just for a portion of it.
Mason says the cost of building materials, architectural features, council consents and a variation in the quality of workmanship mean the expense of a rebuild can vary significantly over time and across regions.
“My advice to homeowners is don’t take unnecessary risks, consult with an insurance broker in your area who can assess your needs and is able to advise what type of cover is best suited.”