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Any change in Overseas Buyers attitude after Earthquake ?
I do not have first hand knowledge about insurance payout rules, but say if I am insured for 450K for a 50 year old building, would the insurance company shell out 450K to me to build a new house ?
(Assuming that the house is a total loss and is beyond repair)
Would they not want to factor in depreciation of 50 years ?
Is there any article you can recommend me to read which explains these rules for a layman ?
How does it work ?
Thanks for advising
Yes - they will insure you for replacement value, ie new value, but they most they will pay is what you had but a new version of it, using modern day building techniques and materials are as available. I can send you something if you wanted to show that, but most policies are available on line under their "basis of settlement" clauses. Hope that helps?
Remember when you set your own sum insured you need to take into account demolition costs and an allowance for an inflationary provision. Lots of people overlook this.
Youi is apparently accepting new policies and allowing existing customers to increase their cover. this is against advice from the insurance council. Sounds like a desperate act to hook desperate customers to me. Be interesting to see what happens if someone needs to claim against a new Youi policy after a damaging event before the insurance world returns to normal.
Over 30K to demo my house. Plus think about driveways, paths, fencing, pool and alternate accommodation costs. Also worth checking if the size of the house insured includes any separate garage. There were a couple in Chch who came to grief when they found that the insured size of the house only covered the ground floor. Ouch!
Certainly don't just take a standard rate and multiply by the square metres. There is lots more than just the house.
Getting a QS to cost a rebuild for insurance is quite expensive.
Another option is to just insure for more.
200sqm house in Hamilton insured for $400k=$811
Insure the same house for $600k and you pay $150/yr more.
Not a lot for a big jump.
Yes, the annual cost of the insurance is not a big deal so just adding some extra value seems easy. If you have a total loss though you can bet that your insurance company will propose a payout well south of that amount and leave you to argue the toss. One advantage of living in Canterbury these days is that you get lots of practice at dealing with insurance companies and I see the +/- $500 per property for a QS to establish the expected cost to rebuild my properties as good value should I have a disaster and have to deal with an insurance company. I have a strategy that I get QS reports every 3 years and increment manually in the intervening years which adds around 10% to the cost of my insurances. When taken across capital value of the portfolio it isn't material.
A couple of interesting points to note:
a) In each of the properties (5) the QS could document/justify costs you would not appreciate e.g. demolition/disposal costs, unique property features that would be expensive to reinstate etc
b) When you do this you realise how expensive building is!
c) I had assumed a dwelling rebuild cost of around the value of the property total i.e. excluding the land would be extravagant but in 3 of the 5 properties the QS cost to rebuild the dwelling was greater than that
So you have a QS value the rebuild cost.
You add a bit for inflation each year.
5 yrs down track it is destroyed - do you think the insurance company won't still propose a payout well south of that amount and leave you to argue the toss?
Of course the insurance company will argue about the payout - that is their job, but at least I have an independent professional view of the rebuild cost established before any damage occur and an increment to that cost that has actually been proposed by the insurance company themselves when they put my premiums up each year. I am comfortable that puts me in a better negotiating position than if I hadn't done that. As per my original post, I update the valuation every 3 years, not 5 so that the increments don't get out of hand.
Anyway we are well away from the original topic about buyers attitudes post earthquake.
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