How to Calculate your Sum Insured
The sum insured should equal the cost to fully rebuild your house to its current size using today’s building costs.
It’s the max you’ll be paid if your house is fully destroyed, and it’s your responsibility to decide what this should be.
Knowing exactly what it would cost to rebuild your house is hard. Thankfully, there are useful tools you can use if you’re uncomfortable choosing yours.
If your house is badly damaged you don’t want to be under-insured. Conversely if your sum insured is too high, you’ll be paying unnecessary premium. Therefore it’s important to take some time to consider your sum insured.
Cordell Rebuild Calculator
The Cordell Sum Sure Calculator uses council construction data to estimate the cost to rebuild your house. We recommend using the calculator to get an estimate and then comparing it to what you think it would cost to rebuild.
You can refine and make changes to the calculator inputs. It accounts for things like your house’s size, building materials, demolition costs and age, and is available for over 99% of New Zealand houses.
If you’re still not comfortable with selecting your sum insured, you may want to hire a qualified Valuer or Quantity Surveyor.
What else should be included in my Calculation?
Insurance doesn’t just cover the house itself. Other structures like garages, fences, garden sheds and pools are included in the cover. Make sure you are including these when calculating your sum insured.
Your sum insured needs to include an allowance for demolition or removal of your house. These costs are included in the rebuild costs, so need to be considered. The Cordell Sum Sure Calculator will automatically include a custom amount for demolition.
Uncapped Replacement vs Replacement to Sum Insured
Prior to the Christchurch Earthquakes you 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 apply sum insured limits so they could better estimate their exposure to disasters.
Some insurers are now bringing this uncapped replacement back, albeit 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 remains very important to have an accurate sum insured.
Sum Insured Myths
Q: Is the RV value on my rates bill my Replacement Value?
A: The RV on your rates account is your Rating Value. This value has no relevance to the Replacement Value of your house, or its Sum Insured.
Q: If purchased my house for $1,000,000 should I insure it for $1,000,000?
A: The market price includes land and other factors like the location. This has no reflection on the replacement or rebuild cost of your house.
Q: I got a valuation when I purchased the house, can I use this value as my sum insured?
A: The valuation was most likely a market valuation, and not a rebuild valuation.
If you have an insurance valuation, this can be used as your sum insured.