The trowels are down, the paint brushes are clean and no loose nails are left behind. The big renovation is over and you’re enjoying your new living space.
Don’t forget that after the job is done, it’s a good idea to think about protecting your new additions. Make sure the home you’ve invested your time and money into is properly covered by your house insurance policy.
What you need to know about sum insured
Most house insurance cover in New Zealand is ‘sum insured’. This means your policy will cover you up to a capped maximum limit – your sum insured. This cap is based around the cost of rebuilding your home from scratch. If your home was destroyed and your sum insured was accurate, you’d get a pretty similar home back. If your sum insured was too low, you might have to build a smaller or lower quality home. So, it’s important to get it right and it’s worth knowing that it’s your responsibility to work out what this amount should be.
What does that mean for my renovation?
When you renovate, you may have added new features and extra rebuild costs to your home. A new deck, a new room or an extension all cost money to rebuild. Therefore, you’ll need to add that cost to your sum insured amount to make sure that it is now protected.
The important thing to remember is that it’s not the market value of your home that you are protecting – it’s the cost of the rebuild.1 The market value of your home includes the value of the land that your home is on. A correctly set sum insured (rebuild value) on the other hand should reflect the replacement cost of the home itself.
Some questions you may need to ask yourself after a renovation are: ‘Have I increased the floor area of the house? Have I added new features like a deck or a swimming pool? Have I replaced fixtures and fittings with more expensive versions?’ Mark all of these down and ensure they are added into your sum insured. Otherwise, you may find that your insurance doesn’t quite cover everything you’d like.
1This needs to include anticipated construction costs, professional fees, demolition costs, removal of debris and GST.