Insurance cracks: the potential gaps in your house policy
The Christchurch earthquakes have left us with tricky insurance issues. CPIA talked with Bob McClymont from Vision Insurance about how to avoid potential policy cracks when insuring your Christchurch properties.
It’s tempting to stick with the company you have always insured with and sometimes there is no option to change, but it pays to compare policies across companies, and not just in terms of cost.
“A lot of policies are similar in the cover they provide.” Bob said. “But there are some technical differences.”
Those differences often came down to what insurance companies covered in the event that extensive repairs or a rebuild was necessary: demolition and the removal of debris; professional services like architects and engineers; building consents, and inflation costs over the period of the build.
Some companies include those costs in the total sum insured, and others cover it separately. “Really the client has to read the policy wording if they’re concerned. That’s the main thing to do,” said Bob.
The other important feature for landlords to check and compare was meth damage coverage.
It was normal before the Christchurch earthquakes for policies to cover the whole cost to rebuild your house. Now you must nominate a sum insured, and you’re going to be seriously out of pocket if you are underinsured and need to claim.
Bob recommended obtaining a registered valuation, but said some insurers would also accept a builder or quantity surveyor’s report. Many insurance companies also have a “sum insured” calculator on their websites, but they can only calculate based on an average house in an average suburb. Bob recommended adding 25% onto that figure.
It’s wise for property investors to regularly check that their sum insured figures were up-to-date.
It’s tempting to snap up that bargain Christchurch property, but buyer beware.
The days of insuring a house over the telephone are over, Bob said. You have to fill out a proposal form, then, if it’s pre-1935-built, you must complete another form stating the standard of wiring, plumbing and if the walls have been re-lined. Then there’s the earthquake damage form, where you must declare any damage the property sustained, whether it was structural, how it has been repaired and proof that it’s to code.
It was possible to obtain indemnity insurance for houses with incomplete repairs, but it didn’t come cheaply: sometimes four times the cost of normal premiums, and the onus was on the client to prove any damage sustained after purchase was not pre-existing.
Any house purchase required thorough investigation to assess any insurance risks.
Check the Standard & Poors rating for the insurers you are considering, and use a broker to get independent advice. A broker will also represent your case to your insurer in the case of a claim.