Over the past couple of months, we have been busy helping some of our clients as they recover from the Auckland Flood and Cyclone Gabrielle.
Over 40,000 claims have been lodged industry wide, with a large percentage of those claims relating to residential property and farms. The work still continues, and our thoughts are with all those affected.
What has become apparent immediately after these events is the level of under insurance. We urge all clients to regularly check the sums insured on their policies whether it be for business or for your personal cover. What does this really mean and how do you do it?
When you set the sum insured at the beginning of your insurance year, you need to ensure that the sum insured (the maximum you will be paid) is adequate to cover the rebuilding/replacement costs in the future. For instance, if a fire destroyed your home on the last day of the policy, or 364 days from now, is the sum insured for your house adequate to cover the costs to rebuild/replace in a year’s time? Building costs are currently rising at such a rapid rate that even when sums insured are thoroughly reviewed, in some cases, 12 months later, the sum insured may no longer be adequate. We are predicting that some insurers may insist on evidence of how sums insured are set when placing or renewing home insurance, and some insurers may offer additional cover and benefits to clients who provide this. We expect this may become a standard condition of cover.
There are online calculators available (such as Cordell SumSure) to assist you in estimating the rebuild cost of your home, however the most accurate way to ascertain the correct sum insured is to obtain an insurance/rebuild valuation from a registered valuer or quantity surveyor. An insurance valuation differs from a market valuation in that it provides the cost to rebuild your home (a market valuation is what your home would sell for). Some policies that can be purchased will also provide an insurance valuation to you free of charge as part of the policy should you place coverage with them.
Contents cover has also been a particular area of concern for underinsurance with many people underestimating the cost of replacing their belongings. Whilst losing all your contents in a single event seems unlikely, it can and does happen. Obtaining second-hand or low-cost replacement items isn’t always an option in a large-scale event.
Although your policies are reviewed on an annual basis, we can update your sums insured at any time during the policy period. We are particularly encouraging all our clients to thoroughly review their home and contents sums insured.
Under-insurance is easily remedied. Usually, it costs less than you may think to increase your sum insured, and opting for a higher voluntary excess may assist with some premium relief to off-set the increase.
If you are concerned you may not have enough cover or want to discuss your sums insured with us please get in contact with your broker.