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  Reply # 875260 11-Aug-2013 00:02
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joker97: Absolutely correct. For a few bucks its worth every penny should the unthinkable happen. Over insurance never hurts anyone for a few bucks.


I can see your point, but wouldn't it work out cheaper over the long term,(if you are using an insurance company that isn't doing full replacement like FMI), to get a valuer in to assess it's replacement value, plus cost for demo of the old property plus the consultant and consent fees? That value is then adjusted by inflation. It is just that if you are paying for $1 million of insurance on a property say worth 600k to rebuilt, the insurance company would only pay the 600k to you, as prior to the paying out, I presume they will be getting their own valuer in to access it's rebuilt value. They won't want to be paying out more money than the property is going to cost to rebuild. They will want to pay out as little as they have to, which is understandable, as they are a business

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  Reply # 875261 11-Aug-2013 00:06
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joker97: Absolutely correct. For a few bucks its worth every penny should the unthinkable happen. Over insurance never hurts anyone for a few bucks.


It's only worth it if they pay out, which they likely wont. Over insurance is utterly pointless IMO.

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  Reply # 875263 11-Aug-2013 00:20
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NonprayingMantis:
joker97: Absolutely correct. For a few bucks its worth every penny should the unthinkable happen. Over insurance never hurts anyone for a few bucks.


It's only worth it if they pay out, which they likely wont. Over insurance is utterly pointless IMO.


I possibly gives a bit more peace of mind. But I don't think there is any point paying an insurance company more than your need to. The point of insurance is to put you back into the same position you would be, if the event hadn't occurred. But many peoples houses are old and built to old buidling codes, and probably in need of a lot of work doing to it. The question is do you insure for the price of the old house in it's current state, which will be cheaper to insure for, but you would need to topup the rebuild cost. That would essentially be the same position, taking into consideration the true cost of the building. Or do you insure for the cost of rebuilding that same house up to todays building standards, which will cost more to insure for. I think many people will end up under insuring, and taking the risk that their house will not be totally destroyed, so it can be repaired. I think there is a lot more going to be talked about this in the future. They may move back to the old system anyway in a few years, especially if more companies come in with full replacement policies, and the EQ's are forgotten about.

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  Reply # 875325 11-Aug-2013 12:26
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Don't forget that you need to allow for the cost of site preparation such as the removal of the old house in the event of total destruction. This can easily be $30k+

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  Reply # 875346 11-Aug-2013 13:41
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We got a quantity surveyor company to come and do our place in Tauranga. Well worth it as they take into consideration everything involved in a total loss / rebuild . Their assessment was about $120K more than the current insured replacement value. From now on all we have to do ad a percentage to that value for the next years insurance replacement value. It cost us about $600 to get this done..




Regards,

Old3eyes


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  Reply # 875421 11-Aug-2013 18:23
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mattwnz:... I presume they will be getting their own valuer in to [assess its rebuild] value ...

So now is a good time to ensure one has records to support the build quality. For example the original building permit (we obtained the ~20page build/materials specification archived at the local council, plus building drawings). Now would be a good time to make a comprehensive digital record of the property including levels, detailed photos of the foundations/basement (inner & outer), interior quality, attic, paved areas, retaining walls etc. Some Canterburians had trouble persuading EQC/insurance companies that earthquake damage was not "pre-existing". BTW, now there are houses in Christchurch which by an arbitrary stroke of the pen Revised guidance on repairing and rebuilding houses affected by the Canterbury earthquake sequence are deemed to be "level" if the variation in level over the floor plan is <50 mm (~2inches!).

mattwnz: ... it would cost double what the properties RV, ... But to insure it at that value would at least double the premium, based on other peoples experiences.

Our premium increased by 16% for a 40% increase in rebuild estimate. Increased (insurance company online calculator) by 40% because the default figure provided by the insurance company (they warned us) did not take account of our particular situation/quality etc.

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  Reply # 875431 11-Aug-2013 19:12
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lapimate:
mattwnz:... I presume they will be getting their own valuer in to [assess its rebuild] value ...

So now is a good time to ensure one has records to support the build quality. For example the original building permit (we obtained the ~20page build/materials specification archived at the local council, plus building drawings). Now would be a good time to make a comprehensive digital record of the property including levels, detailed photos of the foundations/basement (inner & outer), interior quality, attic, paved areas, retaining walls etc. Some Canterburians had trouble persuading EQC/insurance companies that earthquake damage was not "pre-existing". BTW, now there are houses in Christchurch which by an arbitrary stroke of the pen Revised guidance on repairing and rebuilding houses affected by the Canterbury earthquake sequence are deemed to be "level" if the variation in level over the floor plan is <50 mm (~2inches!).


EQC will still try and tell you the damage is pre-existing. Even if you have their word from an earlier incident that it's not, not that their word is worth faeces mind you.

Your insurance company might be awesome, but unfortunately you have to deal with EQC in a natural disaster, there is no way out of it.

What you really need to be able to do is add lawyer insurance, for suing EQC in the event of a natural disaster. I'm dead serious, this should be part of every insurance contract.

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  Reply # 875468 11-Aug-2013 20:13
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FMG are still doing total replacement insurance, and you dont have to be a rural customer

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  Reply # 875483 11-Aug-2013 20:58
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kiwitrc: FMG are still doing total replacement insurance, and you dont have to be a rural customer


There is also an insurance company that mainly insures medical people. Can't remember what it is called.



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  Reply # 875815 12-Aug-2013 13:11
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Sorry, I've been off for a couple of days - some interesting points coming out.

There seems to be a wide difference to what a rebuild valuation would cost and I should also check for indemnity insurance.

The question over what final value they would pay is concerning - why is it that if I pay $600K rebuild insurance that they can then pay out $450K?  What that means is they are happily taking money for premiums for an amount they are unlikely to pay out - I mean who wants to underinsure the house? 

If I insure my life for $500k and I die - they don't perform an assessment of what I was really worth and pay out on that amount.   Maybe this should be put to Fair Go et al.

If I get a professional valuation, what's to say they don't add 20% just to be on the safe side, so I lose both ways? 

The more I think about it the more I am annoyed at the situation.  I'm going to speak with AMI to get some clarification on the estimate process.

The fact that there are probably only 2 re-insurers in NZ means we are held by the short and curlies!

[Sigh, rant over]




Procrastination eventually pays off.


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  Reply # 875819 12-Aug-2013 13:21
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StarBlazer: Sorry, I've been off for a couple of days - some interesting points coming out.

There seems to be a wide difference to what a rebuild valuation would cost and I should also check for indemnity insurance.

The question over what final value they would pay is concerning - why is it that if I pay $600K rebuild insurance that they can then pay out $450K?  What that means is they are happily taking money for premiums for an amount they are unlikely to pay out - I mean who wants to underinsure the house? 

If I insure my life for $500k and I die - they don't perform an assessment of what I was really worth and pay out on that amount.   Maybe this should be put to Fair Go et al.

If I get a professional valuation, what's to say they don't add 20% just to be on the safe side, so I lose both ways? 

The more I think about it the more I am annoyed at the situation.  I'm going to speak with AMI to get some clarification on the estimate process.

The fact that there are probably only 2 re-insurers in NZ means we are held by the short and curlies!

[Sigh, rant over]


other than life insurance, the reason they don't pay out the insured value all the time is that it creates a huge incentive to overinsure, and then defraud the insurer.

e.g.  if my house would cost, say, $500k to rebuild, and I insure for $1m,  then there is strong incentive for me to burn my house down in an 'accident', claim, the $1m, and be $500k up from where I was before.  If they simply work out the value at the time and pay that out, then there is no incentive to defraud since you will only ever be put back in the position you originally were.

The onus is on you to insure for the correct value. the incentives are correctly set up for you to insure for the correct amount. 

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  Reply # 875822 12-Aug-2013 13:26
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StarBlazer: Sorry, I've been off for a couple of days - some interesting points coming out.

There seems to be a wide difference to what a rebuild valuation would cost and I should also check for indemnity insurance.

The question over what final value they would pay is concerning - why is it that if I pay $600K rebuild insurance that they can then pay out $450K?  What that means is they are happily taking money for premiums for an amount they are unlikely to pay out - I mean who wants to underinsure the house? 

If I insure my life for $500k and I die - they don't perform an assessment of what I was really worth and pay out on that amount.   Maybe this should be put to Fair Go et al.

If I get a professional valuation, what's to say they don't add 20% just to be on the safe side, so I lose both ways? 

The more I think about it the more I am annoyed at the situation.  I'm going to speak with AMI to get some clarification on the estimate process.

The fact that there are probably only 2 re-insurers in NZ means we are held by the short and curlies!

[Sigh, rant over]



This is why I think there is going to be a consumer backlash about this in the future, or people won't bother to insure, which will create even more problems if there is a major earthquake One reason why the canturbury earthquake isn't costing NZ taxpapers more is because most people were insured. But what would have happened if most people didn't have insurance? Although as many people have mortgages, they would be required to have it. I am wondering how long it will be before the gv introduces a state type of insurance again, becuase I don't think the current market is working due to lack of competition. Many insurance companies are now just brands, owned by the same parent. Also it is time to get rid of EQC, it does,'t work and just another layer of bureaucracy, and is basically just the government underwriting it anyway. 

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  Reply # 875829 12-Aug-2013 13:38
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There is a lot of angst going into this issue and unfortunately it appears to be one that is needlessly costing people more cash than it should.

By way of disclosure I’ve had several house fires and a house damaged by earthquakes several times so I have a bit of a sense of risk. Your chance of loosing your whole house is very remote. Chances are if you loose your whole house in an earthquake you wont be building on the same site – your neighbors will be gone and your neighouorhood wrecked. The chance of loosing your whole house in a fire/flood/tornado is also very remote.

So no need to stress about a full replacement value now. If your house is wrecked there is a good chance you won’t build exactly the same house. You‘ll want bigger/smaller, flasher / cheaper – depends entirely on your circumstance at the time of the build – not today’s circumstances. Chances are you’ll be happy with a cash settlement and do a runner to somewhere else. And whatever number you arrive at today will be different from the number one day before your premium comes up for renewal.

If you don’t believe me that catastrophic loss is a low risk, bear in mind how the insurance companies are raking in the profits - bigger than ever despite local events.

My approach is simple. Pick a number say $2,500. Multiply it by desired house meterage and then add $50k for demo / ground preparation.

The $2,500 (or whatever) is the number you want to spend on a rebuild in the highly unlikely event you will need to replace. $2,000 will buy you lower quality, $2,500 average quality and $3,000 higher quality. There will be of course a bit of regional variance. No point stressing over $2,400 or $2,500

Meterage is the size of the house you envisage rebuilding – you may not want the same size. If your house is around 180 sqm call it 180. No point stressing over the odd few SQM’s

Chuck in $50k for demo / site works . Add more in if you have challenging ground – like on a hill –call that $80k.

If you get your build value or meterage or demo wrong your just tweak your rebuild budget from the other sums.

So 180 sqm at $2,500 gives you a value of $500,000 total budget. Be prepared to work within that budget.

So think twice before you give insurance companies more premium than you need – though you ought to find there isn’t much different between say $800k and $900k insured value. If you want to see a generation of Quantity Surveyors driving the latest Lexus feel free to get their advice.

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  Reply # 875889 12-Aug-2013 15:06
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I overpaid my insurance by $250k, I included the land cost in total rebuild cost. When I asked for a refund, they said it was a difference of $80 a year. I told them not to worry and if the house gets destroyed I'll get a much nice house.



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  Reply # 875908 12-Aug-2013 15:33
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reven: if the house gets destroyed I'll get a much nice house.

But isn't that what has been discussed where that will not be the case.  At the end of the day, the insurance company will presumably send round their assessor and will pay up to the amount they believe the rebuild will cost not what you have insured it for.  If they think it's going to cost more then tough luck - you will only get the maximum sum insured.  A win-win situation for the insurance company and a lose-lose situation for the consumer.

I know you said it was $80 difference but imagine the money they are making multiplying that by 100,000 properties (a number I plucked from the air).  It's not right!

EDIT: removed incorrect emphasis.




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