Important developments in house insurance

July 15, 2013

in Property

Property: HousingWhether you own a house or are about to purchase a house you need to be aware that insurance companies have moved away from “total replacement” house insurance policies to “total sum insured” policies.

What does this difference mean? Under the total replacement policy it was relatively easy for house owners or house purchasers to put insurance cover in place. The insurance company agreed to provide insurance cover for the total cost to replace the house regardless of the age or construction of the house. Under the total sum insured policy you are now required to advise the insurance company of the specified amount or total sum you want your house to be insured for.

How do you calculate the total sum insured? There are a number of options you need to consider. Most insurance companies now have online calculators on their websites designed to assist you in ascertaining what the total sum insured should be. However, this online calculation may not sufficiently take into account the age or condition or special construction features of your house. Therefore another option would be to seek independent advice and obtain a valuation for insurance purposes from a registered valuer, quantity surveyor or licenced builder. There will be additional costs involved in these options but as this is likely to be either your major asset or one of your major assets you want to ensure that you have adequate cover in place to be able to rebuild your house if it is destroyed. Under total sum insured the insurance company will only pay up to the sum insured and no more.

You need to consider carefully the type of house you own to ensure you are adequately covered. Considerations such as whether your house has been architecturally designed, the contour of the site (whether it is steep, flat, has difficult access for rebuilding), quality of the materials used in the construction of your house, quality of the fixtures and fittings, what building consents and/or resource consents would be required with any rebuild and the costs of such consents, all need to be taken into account.

In summary whether you are an existing home owner or a purchaser, under a total sum insured policy you need to carefully consider the level of insurance you will require to be able to rebuild your house in the event your house is destroyed.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Simon Milne

03 477 8870 or 09 379 0055


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.

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