AMI, State, and NZI Insurance recently learnt that 32% of New Zealanders are not confident they have the right amount of insurance cover in case of a major weather event. *
We know that the changing climate and increasing rate of natural disasters are great risks to every New Zealander. We are committed to helping you understand your insurance policy and making sure you have the right amount of cover - also known as sum insured.
So, what is sum insured?
Sum insured is the amount of cover that your home or contents are insured for. When you take out an insurance policy, you will be asked to set the sum you want to insure your house or contents for.
You decide your sum insured based on what you think your assets are worth. Sum insured is the maximum sum your insurer may pay out, after your excess, in the case of loss or damage, to go towards the repair, rebuild, or replacement of your home or contents.
Why should I review my sum insured annually?
Our survey data also shows that a third of New Zealanders either do not remember when they last reviewed their sum insured or have not done so in the last two years. *
“For your home policy, your sum insured should accurately reflect the amount it would cost to rebuild your home to the same size, specifications, and quality,” says Wayne Tippet, Executive General Manager Claims.
“It is crucial for homeowners to review their sum insured at least annually, because the cost to rebuild can vary due to factors such as inflation, building, demolition, and labour costs, council consents and other professional fees.
“If your sum insured does not reflect the most accurate and up to date price of the cost to rebuild your home – you are underinsured. It is heart breaking to process claims for homeowners with insufficient coverage.”
Don’t set and forget
With prices changing so rapidly now, it’s important not to set and forget your sum insured. If you’ve renovated your home, adjusting your sum insured should be a priority.
Calculating the value of your home or contents
Sum insured can be hard to estimate correctly because the value of our home and contents changes. However, if your sum insured is too low, you may struggle to replace or repair your home or belongings because you don’t have enough cover.
There are some important things to consider when setting the amount of your sum insured, like the accessibility of your property, which would impact demolition and rebuild costs if your home was damaged or destroyed.
We have calculators and tools to help you choose the right sum insured:
AMI
State
NZ IAG SI CN+ Home Content Calculator (homecontents.co.nz)
The Tally Tool helps give people a sense of the average value of contents they may have and how much this adds up to.
Questions to ask when reviewing your sum insured
“Research is key when it comes to reviewing your sum insured, and that starts with basic questions like what materials were used to build your house, where your property is located, and what special features your house has, such as a retaining wall, pool or shed,” says Mr Tippet.
“Similarly, for your contents, make sure your sum insured is enough to replace your personal belongings and furniture.
“It is important to update your sum insured when you acquire new items, including jewellery and electronics. Important belongings like beds are often forgotten – but these can be expensive to replace.”
The nitty gritty
Home replacement policies differ from home present value policies. A replacement policy will cover the rebuild or repair of your home whereas a present value policy may only cover you for the decrease in the market value caused by an event. Find out more here.
Some policies have sub limits for certain high value items like jewellery or artwork. If you have high value items that are hard to replace, make sure you tell your insurer over the phone so they can be specifically covered too.
If you have a high value home, it’s not a bad idea to engage a professional valuer.
For more light reading:
Understanding your Sum Insured with AMI
Understanding your Sum Insured with State
Understanding your Sum Insured with NZI
*This data was commissioned by market research agency Ipsos. This research was in market in February 2023, with a nationwide sample of 1,000 people, and has a margin of error of ±3.1.