Understanding your sum insured
When you first take out home insurance with us, we’ll ask you to specify the total amount you would need to rebuild your home to the same quality. This is known as your sum insured. It’s the maximum amount we will pay, after any applicable excess, if your house was wiped out by a natural disaster or suffered significant damage from major events, like flooding or fire.
If your sum insured is too low, you may not be able to repair or rebuild your home to the same size and quality. Or you could find yourself paying for some of the repairs or rebuild yourself.
What sum insured is
Your sum insured is an amount you choose. It’s not the rateable value (RV) or capital value (CV) of your home, the value of your land, or the market value or the price you paid for your property.
It not only needs to cover materials and labour, but other costs to rebuild your home like demolition, consents, and other fees. Your sum insured should reflect the estimated maximum amount it would cost to repair or rebuild your home if it was destroyed, taking into account:
- demolition costs
- council consents and other professional fees
- labour costs
- the floor area of your home
- fixed floor coverings (e.g. carpet)
- land slope
- construction materials
- quality of materials and finish
- fixtures and fittings (e.g. baths, toilets, ovens, heat pumps)
- number of levels
- your home’s design (e.g. villa, bungalow, contemporary, one-off architectural)
- outbuildings (e.g. detached garages and carports, granny flats)
- driveways, decks, paths, and fences
- any recreational features (e.g. swimming pools and tennis courts)
- special features (e.g. bridges, cable cars, or jetties)
- retaining walls.
Any special features need to be specified, as they aren’t automatically covered. You might also need to add extra cover for recreational features or retaining walls if their cost is more than the policy limit.
Check your policy wording for everything you need to consider in calculating your sum insured.
Owners of cross-leased properties need to consider how to cover shared assets such as driveways, fences, and retaining walls. Check your title documents for reference to a ‘plan of flats’ (or similar) that sets out the various areas the cross lease applies to. If you’re still unsure, talk to your legal advisor.
Body corporates must consider all the units in their multi-dwelling property as well as any common property.