When Tracy hit the ground house hunting on AA Insurance Location, Location, Location NZ, the North Shore’s famous beaches, and stunning homes were front of mind.
Hosts Jayne Kiely and Paul Glover were tasked with finding Tracy the perfect home to downsize to in the sunny southern end of Auckland’s North Shore.
One thing Tracy hadn’t considered was the process of insuring her new home if she was successful in her house hunt. She was about to learn some valuable basics thanks to AA Insurance expert Tom.
What is sum insured?
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To insure her new home, Tracy would need to work out the “sum insured”, which might be the maximum amount she would be entitled to under a claim. That’s often based on the amount it would cost to rebuild the home.
Like most Kiwi homeowners, Tracy had certainly heard the term “sum insured”, but didn’t know what it meant, how to calculate it, and why it was important. She is not alone. An independent property data report found nearly a third of Kiwis weren’t confident their home had adequate insurance. “I must say it’s extremely confusing,” she tells Tom during their chat.
Estimating your home’s rebuild cost
It needn’t be, says Tom. People sometimes think sum insured is the purchase price, but that's not the case. “Simply put, the sum insured figure is how much would it cost to rebuild your house if anything happened,” says Tom.
The sum insured takes into account the floor area, construction materials, and the cost of labour locally. It also considers a wide range aspects of the home including the quality of the flooring and fittings, the construction materials and driveways, and pools.
This left Tracy wondering how much her insurance would cost. “Great question,” Tom replies. The first thing to do is estimate the cost to rebuild. An expert such as a qualified builder, architect, or quantity surveyor, can provide a report. Or there are online calculators for customers to use such as the Cordell Sum Sure Calculator on AA Insurance’s website.
“Most insurance companies will have [calculators] available, and you put in bits of information about the property size, what it's made of, and that will then give you the estimate to rebuild it,” says Tom.
Low, medium, or high-end? Choosing the right rebuild quality
Every home is different and Tracy wonders in Episode one, how she can pick what quality the rebuild is going to be when using the calculators. The answer, says Tom, is you can choose whether it's low, medium or high-end.
To help increase the accuracy of the Cordell Sum Sure Calculator she will need to carefully review the home, says Tom. “Things like high-spec kitchens and bathrooms need to be considered.” Then answer the questions in the calculator with as much detail as possible. That will help produce an accurate estimate to rebuild the home.
Special features and sum insured
It’s important to note that sum insured calculators may not be suitable for homes with special features such as one of the homes Tracy had her eye on in AA Insurance Location, Location, Location NZ.
That home included some materials and features that house hunters adore, making the overall build standard a bit above average. Features such as swimming pools, decks and separate buildings would also need to be taken into account in calculating the sum insured.
Updating your sum insured: not as costly as you might expect
“If you do any work to your house that's adding value, contact your insurer to make sure that you are covered for that extra increase in value,” says Tom.
One welcome surprise on the sum insured front for Tracy was discovering that if she did increase her sum insured at a later date, the premiums might go up, but not as much as she might think.
“Increasing your sum insured might have an impact on your premium – but possibly not as much as you expect,” says Tom. The higher sum insured might only equate to a nominal increase in premium.
“The best thing to do is contact your insurer so you can make a decision with all the information – because you do want to make sure you have enough cover,” he says.
Keeping your insurance up-to-date
The cost to rebuild your home can be influenced by many factors, such as increases in building costs, so it’s a good idea to review your home’s rebuild cost regularly to ensure it’s accurate and up-to-date.
For more information contact AA Insurance: www.aainsurance.co.nz/rightathome
You can watch Tracy’s episode of AA Insurance Location, Location, Location NZ on TVNZ+
New episodes of AA Insurance Location, Location, Location NZ air Sundays 7.30pm on TVNZ 1 and TVNZ+
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