Thinking of buying property? Check insurance first!

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Dratsab

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Topic # 206031 7-Dec-2016 12:39

This applies to the upper South Island (Christchurch up) the lower North Island (Masterton down) and the Bay of Plenty.

While it's not a highly unusual thing, this seems to be something completely off the media radar - insurance companies are not issuing new policies. Nor are they currently allowing increases to existing policies. This, naturally has an effect on the ability of many people to buy property as banks will not lend on property for which full insurance cannot be gained. A number of people have also started waking up to the fact they need a lot more than the generic sum insured amount their insurance companies allocated - but they can't get an increase.

If you're in an affected area, in some cases insurance companies will allow a policy transfer to the new owner but it will need to be investigated first, along with whether the existing policy is actually adequate. Obviously, this will relax to a large degree over the next few months, however I attended a morning tea this morning which included someone well placed in a major insurance company. To paraphrase a quote they made "expect your premiums to go up significantly next year. Don't be surprised if they double."

So, just a bit of a heads up really. If you're looking at buying your first property or extending your holdings - factor this in.

This article from a few weeks back talks about this and is currently still valid.

BlinkyBill

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Reply # 1683834 7-Dec-2016 12:50

I was issued with a new policy only last week. Wellington. No problem.

BlinkyBill

scottjpalmer

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Reply # 1683835 7-Dec-2016 12:56

I'm building new in February March ish, they won't even issue contract works insurance at the moment.

Dairyxox

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Reply # 1683870 7-Dec-2016 13:18

A lot of banks have their own home insurance they will happily sell. So this isn't such a big issue?

mattwnz

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Reply # 1683881 7-Dec-2016 13:29

This has been discussed in the media, as a lot of house sales are stalling or falling through as a result. Real estate agents have been panicking. Apparently sellers maybe able to assign their insurance cover to the buyer in some cases, but need an indpeth building report on the building.

mattwnz

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Reply # 1683905 7-Dec-2016 13:34

Dairyxox:

A lot of banks have their own home insurance they will happily sell. So this isn't such a big issue?

I don't see how that would make any difference, and aren't most banks resellers of insurance? The writing of new policies seems to be across the board from what I have read, due to the earthquakes being a current event, and there could be large aftershocks at anytime. I can see the insurers points of view on this too. It is why we really need state run insurance, to replace the current system, and to get rid of eqc.

itxtme

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Reply # 1683909 7-Dec-2016 13:41

We just went unconditional in Wellington. You need an insurance clause in your contract. In fact many are putting them in Auction contracts and Tender contracts. We got unstuck by the 40 day clause. An insurance company wont cover more than x amount of days before settlement, and you cant insure something you dont own, so cant start the policy earlier.

What it means if you dont have cover sorted prior to being unconditional you put yourself at awful risk that there could be another earthquake and you will be unable to get insurance closer to settlement. If you dont have insurance the bank wont pay out the mortgage, and you start getting penalised by late settlement terms in your contract.

We ended up getting cover by the same company as the vendor. That meant they will keep the sum insured that the vendor had set, which in our case was a realistic value so the bank was happy too.

Its certainly not impossible to get insurance but it is harder than normal, and I would not go unconditional until you have a policy, who knows what is around the corner, and then you are screwed especially if the house is not damaged.

Disrespective

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Reply # 1684039 7-Dec-2016 15:56

While this is what's reported, you can get your insurance increased. I know, because I did.

I have a slightly different circumstance to most, but I undervalued our property when we had it insured because I wasn't fully aware of some rebuild costs in the area/style. I called my insurer and explained the situation and waited on hold while they spoke to an underwriter about it and was eventually given the update I requested. Which to be honest, is still a little low.

For clarity of information, I work as an architect (so am uniquely qualified to make educated estimates of value) and in our office we are currently struggling to get projects out of the ground for less than about $4k per square meter. This still includes some architectural flourishes and unique detailing that most/all bulk home builders would not be able to do at their prices (between $1600-$2500 per m2 from what i'm seeing/hearing). We have also repainted inside, redone the bathroom, installed insulation and built a small shed since the purchase so have added a fair bit of value there which was not allowed for in the original estimate.

I can completely understand the insurers' current position, but it won't be long before the restrictions ease and fall back to the norm. If you talk to an insurance broker there will definitely be an insurer prepared to insure the property, you will just have to pay a higher premium until you can change to someone else. And the insurer may not be local.