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replacement property insurance
My question is to do with property insurance, I hope somebody can help
We have just purchased a holiday home & now that we have finished renovations we hope to have insurance upgraded from agreed value to replacement.. The bach is on a septic tank (as is the whole town).
If the unthinkable were to happen & an event caused a total loss of the building, the local & regional councils require compliant septic solutions to be installed for new builds.
The tank is functioning well as designed & was only intalled around 13 years ago, so has plenty of life in it yet but I doubt it would be compliant to new standards. Would the replacement insurance policy take care of this (around $40K+ for a new solution) or would we be on our own so to speak? The registered valuation is $160K so $40K is proportionally high & money we wouldn’t have. I am a nervous person so any qualified help would be appreciated
Your replacement policy will probably have an additional benefit clause that includes statutory requirements. This means if the council requires you to upgrade the building eg for insulation, foundations, heating source etc the insurer will pay for this as long as there wasn't an entry on your LIM report requiring you to do it prior to the disaster. I assume sewerage requirements would be covered by this but get the broker/insurer to confirm in writing before signing up.
If your replacement policy has a sum insured limit (some do especially on an old house) ask the insurer what should be included within the sum insured as some insurers have started to argue that additional benefits should still be included in the SI limit so must be allowed for when the cover is set. If they say they must be allowed for in the SI you also need to allow for demolition costs, architects and other professional fees, the possibility that the unknown might happen like your land turning blue/green so you need extra expensive foundations etc.
We are currently battling our insurer over this one at the moment as our understanding is that "additional benefits we will also pay for" means they will give us the money to pay for the additional benefits but they are saying that they are additional "in nature etc" and describe the types of things they will cover under the SI but they won't give us any more to pay for them. Does anyone else have one of these policies and what is your opinion/understanding?
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