Sum Insured vs. Replacement Policy
Before the Christchurch Earthquakes most policies didn’t have a sum insured. Insurers would simply pay to rebuild your house to its existing size (no matter what the cost was). After the Christchurch Earthquakes insurers began to use sum insured limits so they could better estimate their risk to disasters.
Some insurers are now bringing this uncapped replacement back, but only for fire. This means if your house burns down your insurer will pay to fully rebuild it, even if it costs more than your sum insured.
For the majority of policies the sum insured limit still applies to all other losses (like earthquakes). Natural disasters are by far the greatest cause of total house losses in New Zealand. While the uncapped cover for fires helps, it’s still very important to have an accurate sum insured.