Insurance: Home and Contents - AAMI, RAC etc?

SaberX on 21/10/2016 - 13:22
Last edited 21/10/2016 - 13:26

Hi all,

So first time house builder/owner, reached practical completion so in order to make my final bank payment I need to get insurance in place.

I was umm'ing and err'ing but basically I came down to two (didn't check all as there's just too many, just did some comparison website searches) insurance providers: AAMI and RAC for home and contents. I am still debating whether I need 'contents' given all I have is window treatments (to be installed) and carpet… however, my intention is to hopefully add on an engagement ring next month with personal valuables cover (for some context).

Just wondering if anyone had any experiences with AAMI or RAC for the above (or even with personal valuables cover i.e. if I add the engagement ring on) - particularly on everyday accidental damage or 'sticky ' situations. Basically want to get a feel for who tries to wiggle out or make your life a living hell to claim anything, or 'catch you out'. I would only be using it for the right thing anyhow so I just want a hassle free approach, not one with unreasonable demands in order to get something replaced.

I just want my house insured so it doesn't burn down and everything is lost and I'm financially ruined, but of course if water seeps through the bathroom walls or something I'd like to be covered. Whereas I do see some nasty reviews of wiggling insurers, i.e. you broke tiles to access burst pipe for plumber to fix, ring up insurer retrospectively then tiles not covered as you needed to get it assessed/done by the insurer before taking action etc. Unreasonable things like that.

The lady I spoke to on AAMI last night was pretty nice and had done a storm claim herself as an undercover customer (owns a policy with AAMI) without mentioning she was a staff member, and had good experiences.

Also, my build was circa $225k. There's another 30k or so of additional building costs to be added post handover - e.g. air conditioning (ducted), side/back landscaping, painting, lights and electrician work - I was thinking therefore of insuring for circa $275,000 as this was above and beyond what my project build cost - $255,000 based on above estimates. Demolition/clearance is usually (by RAC and AAMI from memory) mentioned as paid in addition to your sum insured anyway, i.e. up to 10% of 275,000. I figured $25,000 is sufficient??

When perusing AAMI's online calculator they bring up $364,000 sum insured building value as a minimum, and tweaking it over the phone call centre the best they can get is closer to $315,000. They argue that the total sum insured is a lot higher than what you may think it costs. I would have thought if my project builder cost $250,000 all up, add $20/30k would be enough to demolition, clear and basically rebuild the same thing if my house was destroyed?

Am I missing something? I don't want to underinsure… and the AAMI quote for home and contents of that $315,000 and $30,000 contents comes to $665/p.a or so anyway, whereas the RAC for $275,000 and $30 000 respectively, it comes to around the same price (maybe abit less around $620 a year).I'm thinking of going AAMI….

being an RAC car insurance member I found there wasn't really much use or loyalty for having everything with them. AAMI also has a 24/7 number, I don't think RAC goes past their 8pm office hours? Although maybe they have a 24/7 claims /emergency line?

Thoughts, comments?? I know there's a host of other insurers but I'm so mind boggled that I Just chose the two major/common ones as a starting point, I did use some comparethemarket, canstar and finder.com.au, but generally stayed away form the likes of youi, real insurance and woolies, just as I figured going a bigger insurer was more well known/safe?

Financial

Comments

  • Skramit on 21/10/2016 - 13:27
    +1

    Interesting I would have thought the bank would like a say on how much it's insured for…. Hmmmm

    Do you need to get a bank valuation?

    • SaberX on 21/10/2016 - 13:36

      That's a separate process from my understanding. I think the bank has already sent a valuer out to the property for the final payment. I just need to give final authority to pay it, and this can't be done withoua certificate of currency (insurance?? not sure why they call it that). Basically so they know that once I Pickup the keys my house won't burn down and the property's a writeoff that they can't sell onwards if I default :)

    • SaberX on 21/10/2016 - 13:37

      that said it'd be great if the bank or someone just told us you need to be insured for $xxxxx and wollah, done haha.

      • Skramit on 21/10/2016 - 13:40

        Fair enough.

        Don't sell yourself short on the contents. 30k contents is bugger all IMO. When i went around my house and added up all my clothes and cutlery and toaster and appliances and hot water syetm etc etc and fkn everything, it's far far more than 30k to replace even the most basic necessities for a house

        • SaberX on 21/10/2016 - 13:42

          Yeap, but keep in mind this is a new house. SO all that by definition contents would cover would be the window treatments when I get them, and the carpet. THe tiling, oven, gas stove, etc. and aircond will all form building, hence they're included in their.

          I intend to move my bed in and some clothes, my suitcase etc, but I am living rough for 6 months as a first home buyer as I am abit worried about fully decking out the house - I will live in it for my FHOG but am thinking of perhaps an exciting move interstate or overseas in the near future, before I get married and locked down (which wasn't the plan when I first bought and built). Hence why I dont' think I will have a problem with white goods and $30,000 being short?

          For a lot of food I will probably buy out or go to the parents (<5 mins drive) For dinner as per usual. I don't know if it disqualifies you , but certainly one is still occupying a house just because they freeload off the parents still haha. I could also use their washing machine etc. THat and we all would rather the company.

    • [Deactivated] on 21/10/2016 - 15:45
      +1

      Depending on how the finance is structured we're pretty confident the bank will have an opinion on the level of insurance you need. In fact, if the finance was collateralised against the aggregate of land and building, then we'd be extremely surprised if the bank didn't have a minimum amount they wanted reflected on the certificate of currency (COC). If they have lent on the combined value of land and building, it is also likely that they would want to be noted as an interested party on the COC.

      Typically such levels of insurance are determined by a certified valuer or quantity surveyor. For anyone interested, tools like this one here can come in handy when estimating the replacement value of one's home.

      Hope this helps.

      • SaberX on 25/10/2016 - 14:02

        So far I have submitted the final progress payment claim and haven't heard back from the bank. The certificate of currency has the bank as the mortgagee, but apart from that no other mention of them. I dont' think the bank ever mentioned they would state how much insurance I needed - but surely if they had an opinion they should have provided it to me before I needed insurance. I therefore assume it isn't part of their process?

        It would definitely be interesting to hear what the valuer or quantity surveyor would deem as the replacement cost, if the bank told us I would be happy to insure for this value.

        Still - if it was an old house I could understand, but it perplexes me that I know the exact cost contracted to build this thing this very year, and how a valuer or QS could come up with a larger or different amount. Apart from demolition, clearing/making good, the price to rebuild should be the exact same price I paid the project builder - as that included all their drafting costs, government and shire charges etc, for them to deliver the building in the first place???

        • [Deactivated] on 25/10/2016 - 15:29

          I therefore assume it isn't part of their process?

          Speaking from the perspective of having a team of credit advisers who have dealt with banks for many years - it's always best to not assume and, in fact, ask the question in writing (i.e. send them an email and keep a copy of your email/their reply). NB: That's not to say you are wrong in your assumption, it's more that given the sheer scale of many banks, matters such as this can occasionally slip through the cracks and it is rarely more profitable for a borrower to engage in a legal dispute with a bank as opposed to seeking to address the matter upfront in an amicable fashion.

          Still - if it was an old house I could understand, but it perplexes me that I know the exact cost contracted to build this thing this very year, and how a valuer or QS could come up with a larger or different amount.

          A lender wants to know a reasonable cost to replace the structure in a timely fashion, not an Ozbargainer's well negotiated cost to replace ;) Or put another way, if a fire hits and the owner isn't there to watch every penny of the process, what will it cost the insurer to replace the structure that lender lent against in what is ideally a short period of time? More often than not, that replacement cost is going to be more than an astute Ozbargainer would be paying in the first place :)

          Hope this helps and thanks for sharing your perspective - it made for some interesting discussion.

        • SaberX on 25/10/2016 - 18:34

          @naritas:

          No worries - thanks for your comments and feedback! The only question I have is if the bank don't ask for it, and they pay my final progress payment then is it really worth chasing up in writing what is and isn't required? At the end of the day I'll be covered for what I "think" is a reasonable cover, hopefully enough, and so if the bank ever has any problems it would up to them to voice it now? If not and they lend the money for the final progress payment then I would have thought NFA is required to follow them up and cause more work for myself?

          The only thing I might add is I wish we had access to see what their valuer gave for the property at inspection - would be interesting to see what they believe the property is now worth.

        • [Deactivated] on 25/10/2016 - 19:52

          @SaberX:

          The only question I have is if the bank don't ask for it, and they pay my final progress payment then is it really worth chasing up in writing what is and isn't required? At the end of the day I'll be covered for what I "think" is a reasonable cover, hopefully enough, and so if the bank ever has any problems it would up to them to voice it now? If not and they lend the money for the final progress payment then I would have thought NFA is required to follow them up and cause more work for myself?

          Generally speaking, a standard loan contract is designed to minimise the mortgagor's success (i.e. your success) of using the defence of being unaware of the lender terms and conditions against them in the event of a dispute. Not to say that defence is impossible - but the bank's legal team wouldn't be doing its job if that made that a simple affair. So, despite it being a poorly managed process if they forget to ask you, if you signed a loan contract saying that you would comply with their terms and conditions, you aren't automatically discharged from a (fairly common) condition of maintaining a minimum level of cover that the lender deems appropriate.

          PS The general rule of thumb regarding the concept of fair and/or reasonable in bank world can often mean something different to what a regular person may consider to be fair and/or reasonable. So it really does pay to keep a record of correspondence and be proactive when it comes to this type of stuff. You will find that most loan contracts build in provisions regarding insurance, and may treat a failure to maintain a level of insurance that they deem adequate as a 'default' or 'technical default'. If one is deemed to be in default or technical default, they open themself up to the lender subsequently pursuing actions which may cost the borrower more money or damage their credit history.

  • MITM on 21/10/2016 - 14:06
    +1

    Certificate of Currency ie, your insurance is "current", up-to-date, paid up.
    Nothing to do with forex "Foreign Exchange" currencies.

    • SaberX on 21/10/2016 - 14:23

      yeap, I know it isn't, just funny how they don't refer to it of certificate of insurance or something generically normal haha.

  • fruit on 21/10/2016 - 14:30
    -2

    TL;DR

    • SaberX on 21/10/2016 - 16:45

      still driving?

      • fruit on 21/10/2016 - 16:46
        -2

        shitposting will be the new currency

        • SaberX on 25/10/2016 - 13:57

          still have no idea what you are on about.

          And I thought TL;DR was for posting a response later on once you'd parked?

  • 2jzzzz on 21/10/2016 - 15:11

    275k is nothing. You have to include demolition, clearing, any fees like council, government and engineers etc. Then build it all back. I'm insuring mine for $500k for a normal 422 house so I'm not short.

    • SaberX on 21/10/2016 - 15:44

      yeah, but is that $422 house as in the house and land combined? or just your house cost $400? keeping in mind that the $275k is after $250k of total price for my project builder to build my house and my post handover add ons, and that a lot of insurers like RAC and AAMI"s PDS seem to indicate that your insured value doesn't include demolition, clearing, council/engineering fees etc - which they pay you on top of your insured value i.e. I think with AAMI they pay up to a max of 10%?

      • nafe on 21/10/2016 - 16:56

        I think he means 4 bedrooms, 2 Bathrooms, 2 car garage….

        • SaberX on 21/10/2016 - 18:11

          thanks - never even crossed my mind. makes sense. But jeez, how big is his 4x2x2, $500k for a building replacement cost seems abit overkill?

  • SaberX on 21/10/2016 - 21:02

    I went for $350,000 in the end, although their total replacement estimate was $450,000. I still can't understand how my $225-250k costing build, even if not from an empty land, could cost nearly double to demolish and clear and completely redraft/build from scratch? Assumedly the project build costs already include all their shire and council fees, drafting, architecture etc, plus their markup margins? I could be wrong though… but I was assured I could increase from $350k up to the $450k calculated by their system if I so choose to be.

    Be great to hear from others who may be able to explain if this replacement cost is realistic or extreme and what the right amount one should insure their house for, should be?

    • SaberX on 25/10/2016 - 13:59

      I ended up going with 350k sum insured value. Given the project build was 225k , once I add on air conditioning, lighting, a few other 'permanent' building, I would be well close to 255k or so max. Maybe 260k. So one would think 90k+ extra would surely cover any costs to demolish, clear and do architecture, government fees etc. again. After all your project build takes cares of all these drafting and fees, surely if you had to demolish and clear, you could theoretically employ the same project builder to build it again for 225k (assuming it burnt down today, so today's prices).

      Interesting enough the insured value per the system was 450k, you could 'lower' it to 315k or 320k I forgot, but I went 350k for that peace of mind. Very interesting argument now as to just what the true cost of replacing a home is. Especially when you've just built it and know exactly how much the project builders charged?

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