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How much to rebuild your home?

11 April
2013

Posted by Tom Hartmann in Insurance, Mortgages, Planning | 43 comments

Let’s walk through the major change that’s in the works for house insurance. You will now be responsible for calculating the cost of replacing your home as you set your insurance levels. Most New Zealand insurers are rolling this out this year as you renew your existing policy or buy a new one.

The traditional replacement policies we currently have, which guarantee our homes will be rebuilt no matter what the cost, are now being phased out. In their place will be ‘sum-insured’ cover that caps the amount that insurers will have to pay out if your house needs to be replaced after a catastrophe.

(If this sounds familiar to you, it may be because New Zealand had these types of policies 20 years ago, or the fact that most countries in the world have them. It’s a case of back to the future.)

With the cost of rebuilding Christchurch reportedly between $20 and $30 billion, insurers have been after a more precise idea of how much a similar event might cost in the future. Having you set a cap on your insurance is one way of doing this.

Which brings up the all-important question: how do you figure out what it would cost to replace your home?

Getting your sums right

Your sum-insured figure has to be accurate and kept accurate, and it’s up to you to make sure it is. To help, online calculators like this one at need2know.org.nz have been developed for New Zealand conditions and are a good place to start.

If your sum-insured number turns out too low, you could end up not receiving enough to replace your home and having to pay the difference. If your number is too high, you may be paying for insurance that you don’t need.

Remember, your estimate cannot be based on how much you paid for your house, or even how much it cost you to build it. It is not how much it is worth today and has nothing to do with its rateable value, either. And it does not include the land value, since insurers do not insure the land you build on.

Instead, it is the amount it would take to completely rebuild your home in the event of a disaster – including any demolition and removal costs that might be necessary before rebuilding can even begin.

The cost to rebuild will change every year due to building costs, inflation and rising house prices. It makes sense to do an annual review of the costs. You’ll need also need to allow for any renovations you may have had – if you redid the kitchen or added an ensuite.

What a calculator can’t do

While you may start out with a ‘safe’ sum insured, when money’s tight, won’t it be easy to just skip raising that sum each year and avoid paying increased premiums? Companies and calculators may suggest a higher amount, but it will be up to you to increase your sum insured.

And I’m sure you’ll agree that each of our homes is unique. Although the online calculators should be able to give you a general idea and periodically adjust for inflation and market conditions, one size cannot fit all.

What happens if your house has special features? (I’m still dreaming about a soundproof music studio at home someday. That would certainly cost more to replace.)

Building costs themselves can vary because of so many circumstances. There’s also the cost of removing all your stuff from a damaged house, for instance, or rental costs, design costs, building consents – things that a calculator may not include.

The good news is that you can get help. One place to start is the Property Institute Member Directory, where you’ll find a qualified valuer near you. You might decide you want a valuation each year to keep up with your circumstances. A licensed builder may also be able to help you estimate the likely cost of rebuilding – but keep in mind it may not be their area of expertise.

It’s complicated business, all this, but it’s good to stay informed about the changes ahead as you insure your home and keep it covered. 

 

Post your comment

43 comments

#1 1:06pm
13/04/2013

Quantity surveyor

I would recommend engaging a quantity surveyor to undertake rebuild valuations on upmarket or "out of the box" type properties.  The Christchurch earthquakes have shown particularly on commercial properties that sum insured recommendations made by valuers have been set much too low. This left many commercial property owners well under insured.
#2 7:59pm
16/04/2013

Bruce

The calculator need2know goes into a lot of detail but does not ask about bedrooms, lounge, dining or other rooms. Does this mean these are irrelevant?
#3 4:05pm
30/04/2013

www.myrebuildva...

The only professional who can truly come up with a value for this is a Quantity Surveyor, builders have been advised against it by their membership organisations as they do not have the correct insurance to protect themselves if they are incorrect. A property valuer can provide information on market value, however specific costing of an existing dwelling for the purposes of rebuild is solely the expertise of a QS. Please go to www.myrebuildvalue.co.nz for help with this.
#4 9:18am
29/05/2013

Quantum® Ltd.

Quantum® Ltd is an independent  professional quantity surveying consultancy that can provide cost effective rebuild estimates for insurance purposes.   Their clients include the Home Owners and Buyers Association, QBE (International) Ltd., Chartis Insurance New Zealand Ltd, and Vero Insurance amoung others   They also provide seismic upgrade estimates and leaky building remediation estimates.   www.quantum.net.nz
#5 2:43pm
31/05/2013

Fraser

Umm half a million dollars to replace my modest little Cali bungalow? I hope my insurance company doesn't use this calculator, or my premiums are going to treble.
#6 5:42pm
01/06/2013

mandy jane

This is a manufactured windfall for quantity surveyors and the insurance industry.  No more, no less.
#7 9:47pm
14/06/2013

Henry

I am truly surprised at the poor quality of commentary on this issue from the main stream sources, including SORTED, CONSUMER, FAIR GO, CAMPBELL LIVE.  I am writing this after having talked with a friend - in her 70s - who is seriously stressed by these matters and wondering what it all means.  Not the least of her problems is worrying about where she will get the money to pay for a proper valuation as all she has to live on is National Superannuation and the costs of using a proper valuer are far beyond her means. There are a whole host of questions one can ask about the issue of sum insured not answered by this site or others.  One of the most important, of course, if you are a retired person, is `Do I have to value the house as if I wanted to replace it to its former glory or would a value closer to what I might actually want  after any disastrous event?'  Thus, for example, my friend above might be quite happy to make do with a rebuild which leaves her with a smaller, more modest house, than the one she currently occupies.  This would keep her premiums down, one would assume, and - in the unlikely event that disaster struck - she would be happy with a modest rebuild rather than a rebuild of the entire house.
#8 9:57pm
14/06/2013

Henry

PS:  To give an example from this blog comment of how confusing the advice can be.  The author says: "You’ll need also need to allow for any renovations you may have had – if you redid the kitchen...."  So, does this mean that if you DIDN'T renovate your kitchen you need not worry about it, that it will some how magically take care of itself.  And if you DID renovate your kitchen what blind bit of difference would that make? You have to have a kitchen in any rebuilt house, right?  So what difference does it make whether it was renovated or not.  The rebuild itself is a renovation - or is the idea you are going dig around in the rubble looking for the old kitchen to put it back in place?
#9 1:00pm
21/06/2013

Anonymous

The only professional who can truly come up with a value for this is a Quantity Surveyor, builders have been advised against it by their membership organisations as they do not have the correct insurance to protect themselves if they are incorrect. A property valuer can provide information on market value, however specific costing of an existing dwelling for the purposes of rebuild is solely the expertise of a QS. Please go to www.myrebuildvalue.co.nz for help with this.
#10 4:49pm
01/07/2013

Miss H

I agree with "Fraser". My 130m2 house, modest 3 bedroom brick. has come up as $475,000!!!! At that rate it will cost over $4,00 per m2 to build - the going rate at the moment is about $1,100per m2 - brand new. These calculators need to be reworked. Interestingly, my insurance company would not provide cover unless I went with the calculator total for the sum insured, but (anh here's the real bite) = I could not choose my own builder to build up to the value of $475,000 if the house was totally destroyed, They would get council records for floorplans etc, and only build to that spec. They (insurance companies) win either way. There needs to be HUGE public outcry on this - and it's being kept surprisingly quiet!
#11 11:44pm
02/07/2013

Johnnie

Am looking for a policy that will allow me to deliberately cap the rebuild amount at a much lower figure than the true rebuild cost. The circumstances are a large old house that would cost £2m to rebuild but is worth about £450k - and it would probably be impossible to find the materials to rebuild as was. I'd be happy to receive say £750k in the event of a total loss. Do you know if such a policy might be possible to find? This property is actually in Scotland, where I cannot find any such policy - so looking to NZ for ideas!
#12 11:21am
04/07/2013

Debs

$573,000 to rebuild our fairly ordinary 3 bedroom 1930's home? Sounds OTT. But our ins. co. estimated $420,000. Can't reconcile this.
#13 6:32pm
04/07/2013

rabbit

My home loan provider has told me that I have to insure my house to be replaced like for like - meaning that I cannot chose to rebuild to a lesser quality.  However,  my house is an ex-state house, with a solid timber kitchen, wooden floors and windows and feature doors which are considered luxury items in a new home, and unjustified for the rebuild of what is otherwise a rather modest house.   This seems to be a common issue with older homes - the features that give them their charm would be prohibitively expensive (or impossible) to replace - kauri weatherboards anyone?  
#14 1:51pm
14/07/2013

alan Stanton

my insurance company value to rebuild is $312000.00. The house cost 250,000 to build 8 years ago[I did a lot of work myself].I just used the need 2 know calculator and it cam up with a figure of over $1million. I tried it a second time and it came up with the same answer. This is ridiculous for a house that is valued at $400,000.
#15 12:55pm
23/07/2013

Steph

This new approach is very complicated. I have built my own house, it is full of unique timber, stained glass, solar electricity etc. How the hell I am going to get a true estimate of what it would cost to rebuild it? The truth is - it could never be rebuilt "like for like". Reading the comments, it looks like there are fish-hooks and catch-22s for DIY homebuilders like me. If my house did get destroyed by fire, earthquake or weather bomb, I would be happy with enough money to build a simple, insulated house, it would make no sense to try and replicate my crafted work of art and labour of love! I don't think the calculators will help me. Any advise welcome!
#16 2:08pm
27/07/2013

Steven

The cost to rebuild etc being in many cases so much higher than the market value, who cares? Just insure to market value. If the house is write off, why not take the money and buy elsewhere? Who in their right mind would pay 2 or 3 times the cost of building a new house to repair or rebuild when you you could simply take the money and walk away? Or, have a got the wrong? My comparison is car damaged in an accident. If uneconomic to repair, then, write it off, take the money and buy another car!
#17 12:38pm
29/07/2013

Mark info@...

I have done four online calculations on my 270sqm Brick and Tile home  in Howick  The first one came out at $325000 second $550.000 Third at  $860.00 and forth 1 million dollars We calculated this manually at $ 820k and was surprised to see the difference in the online calculators  I checked up with my Insurance on the house we brought last year to find they put down $420k to replace it I am a building inspector from Howick (First Choice House Inspections) We have been working on a manual program to price Insurance Rebuild Cost Appraisals and a  new web site and logos  etc                                                    We will start this extra service  in three weeks and will cover the Auckland area at this stage  We pay $13500 a year for Full indemnity Insurance All sites will be visited by one of our House Inspection Specialists and all the information and photos will be taken back to the office to be price manually by one of our Licensed certified Builders  Our average price will be about $ 390 plus gst 
#18 1:48pm
05/08/2013

Anonymous

It seems to me that the home owner has no control over this process.  The insurance companies have a lot of power, influence and control in it.  We have little information, if we want more we have to pay for surveyors, we have to trust insurance companies that they are acting in good faith (really?! there has been very little to indicate that they do this).  The insurance premiums for my very, very small 1970's brick townhouse are crazy high, they will go up $70 a month, and what option do I have?  
#19 7:16pm
06/08/2013

Mouse

I have worked all  my life paid the taxes now a Pensioner aged 70, barely scrape through. The insurance premiums keeps rising but my income doesnt, it is fixed to Super.Let alone finding the dosh to pay a QS fee 400-$500 annually to get an accurate  rebuild /replace cost..  Premiums in 2011 cost me $898 for 2012-13 it was $1169. I have never had to make a claim over the 30 years of premium paying. My standard 3 bed house is my biggest asset, I cannot sell off a room to pay for the extra rise in premiums which the duo monopoly of the two big Insurance  companies (gobbled up the smaller insurance companies whose trading names are part of their big picture) have manipulated to ensure their Profits are kept up (by increased uncalled for premium fixing ) doesnt give you much choice  whatever Insurance company chosen, they are all linked back to IAG or Vero when claims are made.  A no claim bonus  (every 5 years) would be appreciated in lowering premiums for the faithfull insured.  I understand that the earth will move oneday which is why this future yearly insurance is required and that hopefully EQC levy funds will still be available  but only if you have insured correctly with the huge profit making Insurance companies.  Insurance companies are great at insuring their own future losses and profits/dividends to their shareholders by simply increasing their incomes by premiums on almost any policy they issue.Unlike retired homeowners on fixed incomes. the prospect of getting paid work  to boost personal income just to pay the increased cost of basic utilities and the big brother insurance is also very limited. If I dont increase the so called value, just stay  with my current sum assured, in the event of a major disaster, I will most likely end up with a one bedroom mouse house! as the  insured replacement. 
#20 1:08pm
13/08/2013

mjd

we bought our home in 2005 for $140 000 it is valued at $220000 now but to rebuild according to calculator it would cost $660 000 it is only 2 bed roomed villa not a big mansion my premiuims would be huge if insurance goes by this calculator
#21 9:51pm
19/08/2013

Brent

Send your child to where ever they train Quantity Surveyors or Insurance agents, they'll never be out of work. Need2Know says $520,000, Cordell says $375,000 yet they ask the same questions almost word for word. Would you trust an Insurance Agent ? Would a fresh faced just out of school QS know anything about house and building costs. Gawd only knows ! And there will be an escape loophole for the Insurance Company any way as Christchurch people have discovered.
#22 10:19pm
19/08/2013

Anonymous

Seems very approximate and the lack of questions means you can't realistically get an accurate rebuild value. Having gone through this process in Christchurch, and being absolutely hammered by our insurance company in the value they decided it would cost to rebuild our house, it's a win-win situation for the insurance cos. They estimate the value as high so we all pay big premiums, and then when it comes time to rebuild, the value will dramatically shrink. Basically no matter what we did, they wouldn't listen to anyone's info on a re-build cost except their own 'experts'. We were paid out at $287k to rebuild our house, I've just valued it at over $100k using their online tools. Ripped off either way
#23 10:37am
17/09/2013

Skeptic

What ever value you choose, expect it to be "reevaluated" by the insurance company in the event of a claim.  Expect the final evaluation to be in the best interest of the insurance company.  So over-insure, but realize you will be paying extra premium for no extra insurance
#24 12:25pm
18/09/2013

Colleen

I am a83 year old pensioner with only my super as income. I live in a small 2 bedroom unit on a flat section - one of 4 joining units. According to the calculator I need to insure it for $685000!!!!! I do not live in Auckland. Do I have to pay for the whole block of 4 to be replaced? I certainly can't afford a quantity surveyor to value it. They must be laughing all the way to the bank.
#25 8:52am
01/10/2013

Phil Molineux QS

For those worried about 'capping' your insurance cover it sounds as if you need a 'functional replacement' estimate which will provide for a house of similar size although not a 'like for like' replacement eg. a traditional period property would be more expensive to rebuild with the materials and detailing required. A more modern 'functional' design and materials to provide a similar space would be a cheaper option for insurance purposes. See www.maltbys.co.nz for more details on insurance valuations.
#26 8:20pm
22/10/2013

Anonymous

I hope this new house insurance policy's premium won't go up if we keep our replacement value same next year. Not like typical insurance policies where amount is same and premium increase every year regardless of sum insured.
#27 2:42pm
04/11/2013

DC

The calculator is useless and must being used to get more money for the building industry and Insurers. Example Cal 1:       $860000 Cal 2: (removing 1 toilet) $565000 Toilets seem to be really expensive !!!!!!!!!!!!!!!!!!!!!!
#28 1:48pm
13/11/2013

Anonymous

Seems like these calculators work best for 'plain vanilla' style housing, and beyond that people need to think about what they would require of the rebuild. I have tested out 2 calculators on our 2 rental properties, a 1994 very standard 3bd Fletchers home as well as a character bungalow. The first property comes out at $189 - $226k depending on calculator, or would be $186k if I take a flat $2k per m2. Steven's comments below about insuring to market value (recent RV minus land value) makes sense and would see it at $200k too so that one house is pretty easy as they all come out pretty much on a par. However, there is a BIG gap for the bungalow from $280k (Market value or flat $2k per m2) to the calculator values ($425 - $450) due to identifying it as a bungalow early on NB: would be $277k if group housing, or $358k if architect designed with all other parameters stay the same. As this is a rental, replacement with a spec house wouldn't make too much difference to our rent, so I'll choose the lower value & keep premiums down, however if we were living there that might be a different story as I'd want the character features retained. If we chose to insure at $450k though, this would see a huge increase in premium and means we would be insured for well over what the council and a registered valuer felt the house was worth as improvements to the site.
#29 3:22pm
22/11/2013

Anonymous

Maybe getting together with 2 or 3 other home owners in your street who have similar homes.. then splitting the cost of the valuation may be a good idea to reduce the expense
#30 7:03pm
29/11/2013

Terence

I believe the Govt. is going to have to get involved here as this whole process is going to be beond the ability and the means of the majority of New Zealanders.A state owned insurer is going to be needed just to keep the insurance industry honest. The days of honesty and integrity in business are long gone and the extraction of every last cent of profit is the imperitve regardless of the means. You only need look at the telcos and banks to see the trouble they get themselves into. I suspect many will be forced out of their homes as they will not be able to pay the premiums. my own home for which we paid $172000 twelve years ago has a replacement cost of $470000 to rebuild, not including the garage and sheds or fences. It certainly is not worth anything like that on the market if we were to sell.
#31 4:03pm
10/12/2013

howard sly

im not sure how many people are aware of this but its still up to the insurance company to decide what they will pay. sum insured does not guarantee that you get paid that amount. pretty crap ay.
#32 2:23pm
29/12/2013

Nev

My recent State Insurance estimate is $621,000 for 1905 Villa that has been relocated and the original plans are the only ones the Council has.  Previous owners and myself have modified the house. I just want to buy Insurance to build a 200sq m house ($400,000) (Manawatu). I don't want to insure my 9 x 6 garage, my driveway, demolition costs or anything else.  The Insurance Companies will not have a bar of this as they want to extort the homeowner by forcing them to pay for all their "consultants" and to use their expensive building companies.  I simply want to ring a building company, if my house is deemed non repairable, to build my replacement house. I would pay for the demolition and site clearance myself as I own my quarter acre. I believe the Govt should have its own Insurance company (such as NZI used to be) and tell these multi national Insurance bastards to get out of NZ and take John Key with them.
#33 4:05pm
02/01/2014

howard sly

Cordell!I completed two separate online sum insured calculators one provided by kiwibankhttp://homebuilding.cordell.co.nz/index.php?c=introduction&profile=30&re...  and one suggeted by yourselves, sorted.http://need2know.org.nz/what-you-need-to-do/calculator/both have the same questions and both use information provided by Cordell yet there was a difference of $11k? Perplexing.
#34 12:03pm
08/01/2014

John

Have just calculated house value using THIS calculator and compared the result with the TOWER Ins. calculator. The results are very interesting!  Both sites use the Cordell calculator. Tower came out at $334,874 This calculator at $367,013. A difference of $32,139. The first thing I did was to check my input to both calculators - all was identical! Conclusion is that the Company using this calculator is able to 'tweet' it to their (advantage?). I am not in a financial position to spend upto $1500-2000 (quoted) to call in a professional. Am in my 70's and like so many in this age group am asset rich and cash poor. Tower have estimated my value at $382,000 ($2000 m2). Guess I might up cover to $400,000. Next step is to call them and get a quote for this figure.
#35 5:01pm
09/01/2014

Moby Dick

Note that the 'need to know' calculator is provided by IAG, NZ's largest general insurer. Whatever they say, they have a conflict of interest in setting up a tool that increases the premiums they extract from customers. In my case, my annual premium would treble. I think Steven's advice is sound, insure for what you would want to replace your existing home. If you have a place with market value of (say) $400,000, and you would be happy to move to an equivalent house then why insure for $600,000? IAG are trying to convince you that in the event of a total loss you would want a totally new house, exactly the same as your old one. Of course the likelihood of total loss is remote, but IAG are quite happy to pocket the extra profits. As for paying $500 for a QS, that's another industry rort. The sensible thing is to insure for market value (less land).
#36 8:37pm
13/01/2014

Sandra

I have just received my Insurance bill from State for which the premium has increased by 75% over the past two years.  The Home Sum insured is more that the GV including the land.  Good grief.  Think I'll pass this on to my husband this year.  I've done the insurance for the past 21 years - must be his turn.  It's a pain having to get quotes, but might be worth it this time.  Good luck everyone else.
#37 11:44am
27/01/2014

Dianne Khan

This whole thing is a nightmare.  It should not be this hard to get insurance.  I am an clever woman, but this is going to make my brain explode.
#38 12:18am
01/02/2014

O'Buck

WHY is it that everyone has to insure for replacement / rebuild value? For many people the indemnity value will be adequate, allowing for the purchase of another home or whatever the person chooses to do with the insurance proceeds. Indemnity value was the basis of insurance from the time the business of insurance but now it seems that option is being sidelined for domestic house insurance. This is the wrong approach in my view; rebuilding cover should just be a customer choice, the same as it was some years ago (before the industry decided to "make it easy for customers" and which practice it seems has now nipped them in the posterior)  The current hype around all this this could easily be seen as a cynical way to generate more and profitable premium income for the insurance industry at the expense of customers. So, let's see a more realistic and customer friendly approach from the industry instead of this current nonsense.
#39 5:10pm
03/02/2014

Lesley

I looked at this site late last year and decided to pay for a professional valuation as my house is a bit unusual, pkus i was alarmed by what i have read here about the discrepancies with valuations. I just got my valuation, which comes in at 947,000 yet the rating value (2007) is only 431,000 which includes the land value as a big chunk of that figure. Very confusing and worrying, as i am not sure what to do now, plus i will be getting a bill of several hundred from the valuer. It would be nice to know that in the event of another disaster my house could be rebuilt but i assume i would in the meantime be paying massive premiums
#40 3:31pm
28/02/2014

John S

When considering the replacement value to insure for, make sure to carefully read your insurance policy details, to determine whether GST is included or excluded from the sum insured cap. My policy is with NZI (part of IAG) and the sum insured excludes gst. Hence, when using a calculator to determine the estimated value I needed to select the excl GST value. With GST at 15 percent it makes a significant difference.
#41 8:58am
10/03/2014

Marquess

All I can say is this will force more people to rent and leave the risk to others who are prepared to pay.
#42 11:16am
15/03/2014

peter jamieson

There was a time when AMI were a helpful company but try and talk about the costs of compliance demolishion etc and 'we have no idea'.
#43 11:56pm
17/04/2014

Bob Fortune

I used the calculator from need2know.org.nz to prepare my estimates. It was quiet shocking to see the variation in costs quoted by a reputed property consultant. Now I’m also concerned about the demolition and removal costs and how insurance policies can be made more beneficial with home restoration.        
mightymouse