Dear Ozbargainers
I would like some help on my home insurance. An architect friend recently calculated our home rebuild cost at $475,000 but our insurer has stated that their minimum Home Sum Insured for our property is $604,000 (we are in Bondi). Our Home Sum Insured has risen from $419,200 in 2014 to $604,200 in 2018 even while we've read that inflation is at its lowest rate in 50 years. The crux of the matter is that we cannot understand why we don't have the right to set our own Home Sum Insured. We are quite prepared to accept a smaller house rebuild house in the event that there is a shortfall if, heaven forbid, the worst happens. I would appreciate your comments. Many thanks in advance.
Advice Sought on Home Sum Insured Query
aretsa9 on 14/11/2018 - 16:08
Last edited 14/11/2018 - 16:08
Last edited 14/11/2018 - 16:08
Comments
Does that include the cost of knocking down a wreck?
First time I've heard of someone complaining about being "over insured", but I assume it increases your premium, which is why you want it lower?
I was looking at home and contents insurance recently and I recall seeing a clause in the PDS where they state that they will only pay out what's required rather than the whole insured amount. The insured amount is the maximum they'll pay.
But, the higher insured amount comes with a higher premium, so over-insuring too much doesn't necessarily provide any benefits.
The crux of the matter is that we cannot understand why we don't have the right to set our own Home Sum Insured.
You don't have the right to force anyone to sell you insurance at all.
More relevantly - the insurance company might just not make money off insurances for less than that amount, so they won't sell it. (There are a lot of other possible reasons, knock-down/clean-up costs as someone mentioned, accounting for land values(?), not wanting to have too high of a write-off/rebuild possibility (when cost of repairs exceed insured amount (is that even how that works?)))
*I lost count of how many brackets I used - assume they're all closed.
I think three? I think you did it ok.
It depends I guess on what your premium is, but it’s always better to be over-insured, which no doubt you are probably aware of.
I wonder if the insurer is using recent calculations of rebuilds in the area based on the structure in question. I’d also imagine that there may be an issue of who the insurer is using for their work, and whether the architects estimation is based on a best case scenario or worst case scenario.
I mean it’s a reasonably large discrepancy but ultimately if the premium isn’t much different then it’s better to give yourself the security blanket of a larger insured sum.
It is my understanding that if your insurance company values the house demolition/site cleanup and rebuild at (say) $600.000, and you elect to nominate an insured amount of (say) $400.000 then you will be deemed as co-insuring the property to the tune of 33%
Look at the PDS. In most cases, demolition and debris removal costs form part of the sum insured,and about 50% of the time any temporary accommodation costs/etc are also part of the sum insured. They all add on top of the rebuild cost then.
E.g.
PDS says demolition and debris removal is part of sum insured, and temporary accommodation is included in addition to the sum insured.
If:
House = $450,000
Landscaping = $30,000
Demolition/removal/disposal = $100,000
Temporary accommodation = $10,000Then the sum insured needs to be $580,000. Then you also need to consider allowances for spikes in building costs (e.g. Widespread fires). Again, some policies had this in addition to the sum insured, so you don't need to include it in the sum insured.
When comparing policies, I end up putting it all in a spreadsheet as each company ends up with different sums insured due to all the different aspects that they offer in addition to the sum insured.
That is quite a high figure for demo. Most demos run $30k to $50k.
Count yourself lucky, the sum insured in our suburb and surrounding ones are almost double that.
Silly question; have you called the insurer and spoken to someone about this problem and the options available to you?
Thank you, everyone, for all your helpful comments. To answer some:
yes, we are trying to reduce our premiums which have gone up dramatically in four years but we still wish to remain adequately insured;
we have called the insurer to discuss this without any joy and wanted further advice before perhaps approaching them again;
no, the home is not a wreck :) but well maintained (as per insurer's terms and conditions). Appreciate all the advice offered.I haven't had the same insurer for consecutive years in a long time. Each time the renewal comes up, I plug the exact same details into 3 or 4 competitors and inevitably the price is cheaper with one of the competitors.
Insurance companies don't care about retaining business. They only seem to care about new business, and do not value loyalty.
Change insurer.