Frequently
asked questions
Home insurance provided by IAG and its brands* covers the customers’ home up to a maximum
specified amount called a Sum Insured.
This is because our reinsurers (i.e. the companies that insure us against some of the cost of major natural disasters and
catastrophes) want to know what their maximum exposure is when events like that occur.
What does a Sum Insured
insurance policy mean?
Under a specified Sum Insured home policy, homes are insured on a maximum
dollar amount basis. So if you have a specified Sum Insured policy that works on a
‘replacement’ basis, if your home is destroyed – called a total loss or uneconomic to
repair in insurance terms – and you are insured by us, the maximum amount payable
to rebuild the home is the Sum Insured shown on the home insurance renewal
documents**. This maximum amount payable also applies if the home is repairable
following significant damage. The Sum Insured basis works in a similar way to
insurance you may have for your home contents, where you decide on the amount of
cover you require and that Sum Insured is the most we pay for a claim.
Is the home insurance
offered by all New Zealand
insurers the same?
Many insurers in New Zealand now provide home insurance on a maximum specified
amount or Sum Insured basis. The basis may be replacement ‘new for old’ or
restricted to the value of the home at the time of the damage.
What is reinsurance?
Is home insurance like this in
other parts of the world?
Who decides on a home’s Sum
Insured amount?
Can I increase the Sum Insured if
I don’t think the amount that my
insurer suggests is enough?
If I make an alteration to my home
part-way through the year and
want to increase the amount of my
home cover, should I increase the
Sum Insured?
Reinsurance is insurance for insurance companies; it’s the cover that insurance
companies take out against certain types and scale of claims. Reinsurance helps
insurers to meet the cost of claims following natural disasters or catastrophic events.
Maximum specified amount home insurance is common in other countries such as
Australia, the United Kingdom and the United States.
It’s up to you as the policyholder/s to ensure the Sum Insured amount for your home
reflects the potential cost of rebuilding your home as accurately as possible. This
is because if your home suffered extensive damage and needed to be rebuilt, the
maximum we’d pay is your Sum Insured, even if the actual cost of rebuilding turned
out to be greater than that. There are several ways to work out what your home could
cost to rebuild; these include obtaining a Valuation for Insurance Purposes from a
registered valuer or an estimate from a licensed builder or building assessor (a cost
may apply). We have also provided a calculator on the need2know.org.nz website that
may assist you with estimating your potential cost of rebuilding.
Yes. It’s up to you to decide the most appropriate Sum Insured for your home. There
are several ways to work out what your home could cost to rebuild; these include
obtaining a Valuation for Insurance Purposes from a registered valuer or an estimate
from a licensed builder or building assessor (a cost may apply). We have also provided
a calculator on the need2know.org.nz website that may assist you with estimating your
potential cost of rebuilding. The calculator is not suitable for extremely large homes,
in excess of 700 square metres, or high value homes where the potential cost of
rebuilding would exceed $2 million.
Yes. If you are about to make any alterations or improvements to your home, or make
alterations through the year, you should contact your insurance provider so that you
can factor these improvements into your home insurance policy and check what cover
you have or may need in relation to the alterations.
*IAG New Zealand Limited provides home insurance directly through the State and Lantern brands, and offers NZI policies through AON, Crombie Lockwood,
BrokerWeb Group and other brokers. It also underwrites most of the home insurance offered by ASB, BNZ and The Co-Operative Bank. AMI Insurance Ltd (“AMI”)
is a related company of IAG New Zealand Ltd so, for convenience, all references to “IAG” on this document mean IAG New Zealand Ltd, State, NZI, Lantern and AMI,
as applicable.
**Your policy wording may provide for specific benefits that, if applicable, may be payable in addition to the Sum Insured. Please check your policy wording.
Does the Sum Insured amount for
my home automatically increase
each year or do I need to update it
each time my insurance renews?
Is there an allowance built in for
demolition and debris removal in
the Sum Insured approach under
IAG-underwritten policies?
What are Special Features?
Why not base home insurance
value on a $ per sq metre
rebuilding cost?
Are all types of homes, including
apartments, investment properties
and holiday homes, insured up to a
maximum specified amount?
For IAG and its brands, Sums Insured are adjusted at subsequent renewals in line
with certain average changes in building costs but you should check this each year
to ensure you are happy with the level of cover. If you’re comfortable with the Sum
Insured amount we provide (whether or not it has been adjusted) on the home
insurance Policy Schedule that comes with your renewal information, or you don’t
contact us to change it, then that amount will be automatically applied to your policy
when it renews. This will then be the maximum amount payable for a claim whether
it correctly reflects the costs to rebuild your home or not. For that reason, it makes
sense for you to review your home’s Sum Insured at renewal or at least annually to let
your insurance provider know about any alterations or improvements you make to your
home, and factor these into your Sum Insured to ensure you have appropriate cover in
place. You can also re-estimate your home’s potential rebuilding costs at any time, as
construction costs and other fees associated with rebuilding change over time.
The Sum Insured you choose for your home should include an allowance for
professional fees, demolition and removal of debris costs as well as any retaining
walls, Recreational Features or Special Features. The calculator available on the
need2know.org.nz website includes an allowance for these costs.
Special Features are defined in IAG policies as:
•• private utility plant and associated equipment including but not limited to wind or
water mills or diesel generators
•• cable car and its associated equipment
•• bridge or culvert, permanent ford or dam
•• wharf, pier, landing or jetty.
Special Features are not automatically covered under policies underwritten by IAG and
its brands, so if your home has one or more of these features, you should tell your
insurance provider if you’d like to cover it as it will need a separate Sum Insured.
An additional premium will likely be charged to cover any Special Feature.
The likely cost of rebuilding your home is affected by many factors (for example age,
size, location and quality of construction and the slope of the land your home is
built on), so just using a flat cost per square metre may not be appropriate for your
situation.
The home insurance offered by IAG and all its brands is on a Sum Insured basis,
irrespective of property type or use.
If my home is governed by a body
corporate or subject to a cross
lease what do I still need to think
about for my home’s Sum Insured?
Body corporates need to take into consideration all the units in their multi-dwelling
property as well as any common property when taking out insurance. Likewise owners
of cross-leased properties should consider shared assets such as driveways when
determining their Sum Insured.
Will I be entitled to a cash
settlement if I don’t wish to
rebuild my home after a total loss?
Under most home policies underwritten by IAG and its brands there are options
available to customers who suffer a total loss including an option to purchase another
home or, in some situations, a cash settlement (if we agree). It’s best to check your
home insurance policy wording for the settlement options available in the event of a
total loss.
Why shouldn’t I select a Sum
Insured based on another value
indicator like the price I paid for
my property or the rateable value?
The potential cost of rebuilding a home differs from other price indicators as it’s based
on factors that are solely related to the physical rebuilding of a home to its former
standard. The potential cost of rebuilding should allow for the costs of demolition
and debris removal, materials and labour, professional fees, nature of the section
etc. Other price indicators take into account elements such as land value, location
and market conditions. Market value, the amount of your mortgage or figures from a
council rating valuation shouldn’t be used to set the Sum Insured as in most cases
they will not reflect the potential cost of rebuilding the home.
How can I find out how many
square metres my house is?
There are several ways to measure the floor area of your property. You can check the
property information held by your local council, or refer to your house plans if you
have them. You need to be sure though, that such information is up-to-date. You can
also check with the builder or building firm that built the house, or hire a builder or
assessor to assess the property. You can also measure it yourself if you feel confident
doing so – and don’t forget to include all levels of your home.
Am I entitled to a refund in
premium if, in the case of a total
loss, the actual cost of rebuilding
my home turns out to be less than
the Sum Insured?
No, if the actual cost to rebuild your home after a total loss turns out to be less than
the Sum Insured, you will not be entitled to a refund in premium.
The building cost of a house can
vary depending on the quality of
fixtures and fittings. Does the
calculator on the need2know.org.
nz website allow for this variance?
The calculator asks about the standard of finishing and uses typical building costs
to provide an estimate, so some allowance is made. However, if your home has
significant special fixtures and fittings (e.g. marble flooring, chandeliers) the calculator
may not make sufficient allowance and you may want to consider other options to
establish a better estimate of the rebuilding cost. The calculator is not suitable for
extremely large homes, in excess of 700 square metres, or high value homes where
the potential cost of rebuilding would exceed $2 million.
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