Understanding Home Sum Insured

All about your Sum Insured

New Zealand is a country of proud home owners. Our homes say a lot about us: where we’re from, what we believe in and how we want others to perceive us. The bad news is, many New Zealanders are underinsured.

That’s why we want to work with you and together with your broker to get an accurate Sum Insured in place for your home. 

So, what exactly is total sum insured?

Replacement Home Insurance

When you take out a replacement home insurance policy, such as Distinction, Echelon, Essence, Supersurance, or Houseowners with replacement value cover, your broker will ask you for your total sum insured or work with you to figure this out. This is the maximum amount payable, (with any applicable excesses deducted from that amount), to repair, rebuild or replace your home in the event of a loss such as from a fire or earthquake.

It’s important to have the right figure in place because, if you don’t, you may not have enough cover to rebuild or repair your home to the quality and size it once was, or you may need to contribute towards the cost of repairs or the rebuild. The figure covers labour, materials, demolition, consents and other fees associated with rebuilding and repairing the home to its equivalent size and quality.

Your total sum insured amount also needs to include professional fees and removal of debris, and take into account rising building costs, inflation and any changes you’ve made to your home.

Present Value Home Insurance

If you have a present value Houseowners Home Insurance policy and your home is damaged by an event specified in the policy, we’ll pay the lesser of the cost to repair your home to its pre-loss condition or our estimate of the reduction in the present value of the home caused by the loss– i.e. the estimated price you’d likely receive if you sold your home (excluding the land, which we don’t insure) – up to the total sum insured you set (less applicable excess(es)), so you’ll need to keep this up-to-date.

We’ll base our payment on your home’s condition and market value prior to the damage occurring.

Replacement sum insured

  • is the total amount it would cost to rebuild your home from the ground up to the equivalent quality and size - including any retaining walls, recreational features and special features.
  • is your responsibility to specify and keep up-to-date. Talk to your broker if you want to make any changes to your sum insured. Use the Cordell Sum Sure calculator for an estimate, or arrange for an insurance valuation professional to help determine a more accurate estimate.
  • is not based on the land or market value, nor what you paid to buy your home.
  • doesn’t automatically include special features and, depending on your policy, doesn’t automatically include retaining walls or recreational features. You’ll need extra cover for these.

Market value sum insured

  • should be based on what your home is worth today (excluding the value of the land), with consideration for its condition and age. Talk to your broker or seek advice from a valuation professional if you’d like to make changes to your sum insured.
  • is your responsibility to specify and keep up-to-date.
  • doesn’t automatically include special features such as a jetty or cable car, retaining walls, or recreational features. You’ll need extra cover for these.

Using the Cordell Sum Sure calculator

A great tool to help estimate your total sum insured for your Distinction, Echelon, Essence, Supersurance, or Houseowners (with replacement value cover), policy is the Cordell Sum Sure calculator. It’s easy to use and doesn’t take a lot of time. The rebuild cost generated by the calculator is based on the estimated cost to rebuild your home and includes allowances for professional fees, demolition, removal of debris and GST based on today’s prices. It won’t account for potential increases in future building costs (i.e. inflation) though, so you should factor this in and review it regularly to ensure your sum insured remains up-to-date.

Estimate your home sum insured

Your use of the calculator is subject to terms and conditions, which you can find when you open the calculator. The estimated rebuild cost is a guide only and is not intended to replace a professional valuation or quantity surveyor estimate. Not all prepopulated information provided by the calculator will necessarily be accurate for your house and it is your responsibility to correct any inaccurate information. You must decide whether the estimate is appropriate or if you should amend it based on your knowledge of your house and property.

Note: the Cordell Sum Sure calculator should be used as a guide for replacement policies only. For professional advice in establishing a present value sum insured, talk to your broker, or contact a Registered Valuer.

Why it's important to get right

  • We adjust your sum insured at renewal to try to factor in changes in the housing market or the rising costs of rebuilding, repairing, or replacing your home. However, you know your home best and the adjustment we make doesn’t account for your unique situation nor any changes you’ve made to your home since your policy began or last renewed, nor will our adjustment necessarily reflect the actual change to the replacement cost or present value (depending on your cover) of your house. You are responsible for choosing all sums insured that apply to your policy.
  • If you have replacement cover, setting your total sum insured amount too low means you may have to rebuild your home to a smaller size or lower quality. You may also have to pay for some of the repairs or rebuild yourself. If you have present value cover, setting your sum insured too low may mean that you don’t receive what your home is worth if your home suffers insured damage.
  • You are responsible for setting the total sum insured (including the components that make up the total sum insured) when you apply for insurance and whenever you renew your policy. It’s also important to update your sum insured amount and make sure it’s accurate. A great time to do this is when your policy is up for renewal or if you’ve renovated or added to your property. You can amend your sum insured at any time and it pays to make sure you review it regularly.

Calculating your sum insured

Replacement home insurance

The figure you have for your total sum insured needs to cover all aspects of a rebuild:

  • demolition costs
  • council consent fees and other professional fees
  • labour costs
  • the floor area of your home
  • land slope and access
  • construction materials
  • quality of the materials and finish
  • fixtures and fittings (e.g. toilets and baths, oven, heat pumps)
  • fitted floor covering (e.g. carpet)
  • number of levels - is it a one, two or three storey home?
  • your home's design is considered in the pricing: villa, bungalow, contemporary and/or a one-off architectural
  • outbuildings like granny flats, detached garages and carports
  • driveways, decks, paths and fences
  • utilities or services to your house (e.g. power and telephone lines, data cables, waste water pipes)
  • rising building costs (i.e. inflation).

All of this can be easily estimated using the Cordell Sum Sure calculator or talking to your insurance broker to organise a valuation professional to help you come up with a more accurate estimate.

Present value home insurance

A present value Houseowners home policy covers your home for its present value, for certain events specified in your Policy Wording. Your total sum insured should be based on what your home is worth today, with consideration for its condition and age. The present value of a home can be calculated by using the market value of the property – i.e. the estimated price it would likely sell for – less the value of the land, which we don’t insure. For professional advice in establishing a present value sum insured, talk to your broker, or contact a Registered Valuer.

Additional cover

Remember to include any recreational features (such as swimming pools and tennis courts), retaining walls or special features (like a bridge or cable car) that would increase the market value or rebuild cost of your home. You may need to purchase additional cover for these, so tell your broker if you have any. Make sure you check your Policy Wording for everything you need to include in your sum insured.

What do I need to do?

When it's time to take out home insurance or renew your current policy, you should work with your broker to consider the amount your home needs to be insured for. It’s good to get into the habit of reviewing your sum insured when your home insurance policy comes up for renewal, or when making improvements and renovations to your home.

Although we may automatically adjust your sum insured for increases in construction costs or property market values at your policy’s renewal, it doesn’t account for any changes or additions you may have made to your property like a pool or granny flat or necessarily reflect the actual change in the replacement or present value of your home. You are responsible for choosing all sums insured that apply to your policy.

If you have bought a house, it’s important not to rely on the purchase price to determine your sum insured. If you have recently built a house, you could use a recent build cost, however you need to consider all parts of your home that are covered by the policy such as paths and fencing, as well as costs for demolition and site clearing. You also need to consider inflation that might have occurred since that build cost was agreed and any further inflation that may occur over the course of your policy period. If you think your current sum insured amount is too low, we encourage you to work with your broker. They will let us know if there are any changes you want to make.

How to work out your sum insured

Use an online calculator for your replacement policy

The Cordell Sum Sure calculator is free, easy-to-use and will generate an estimated cost for rebuilding your home. The estimated figure is based on information gathered from across New Zealand from third party organisations such as your local Council. Using this information, the calculator takes into consideration the following: anticipated construction costs, allowances for professional fees, demolition and removal of debris, and will account for price difference in some of these services around New Zealand.

Your use of the calculator is subject to terms and conditions, which you can find when you open the calculator. The estimated rebuild cost is a guide only and is not intended to replace a professional valuation or quantity surveyor estimate. Not all prepopulated information provided by the calculator will necessarily be accurate for your house and it is your responsibility to correct any inaccurate information. You must decide whether the estimate is appropriate or if you should amend it based on your knowledge of your house property.

The calculator doesn’t take into consideration rising costs during your period of insurance. If you wish to include an allowance for this in your sum insured, you will need to add it to the estimate produced by the calculator. The calculator doesn’t add GST to your estimated rebuild cost, because your NZI sum insured is a GST-exclusive amount. GST is payable in addition to the total sum insured for NZI home policies.

If you have any special features (such as a bridge, cable car or jetty) recreational features (e.g. a tennis court or swimming pool) or retaining walls, you will need to add these to the amount produced by the calculator as well. Also, if you live in a home greater than 500sqm or with a higher value than $2million, or an architecturally designed home, the calculator may not be appropriate, as it is designed for standard builds. In these cases, it’s best to contact a professional.

Estimate your home sum insured
Contact a professional  

If you have a market value policy or want more peace of mind that your sum insured is accurate, it might be useful to get a professional in. They will visit your property to assess the rebuild cost, or your property’s market value, depending on your policy. If you live in a home greater than 500sqm, or a higher value than $2 million, or an architecturally designed home, this is highly recommended.

Construction Cost Consultants can provide residential valuations at a competitive price for NZI customers. Contact them below:

Otherwise try other registered professionals, such as:

More about the Cordell Sum Sure calculator

  • If your address can’t be found and it includes a unit number (e.g. 23a), try different variations (e.g. 1/23, 23/1). If your address still can’t be found, Cordell Sum Sure calculator may not have details of the property, it may be a new subdivision or the calculator is not suitable for the property at that address.
  • Don’t worry if the photograph doesn’t match your house. The photograph might be different (e.g. your house is brand new, or there is an old photo, a boundary photo or street front photo) but the property details are based on the address not the photo.
  • The calculator assumes an average floor area for any garages, sheds or pool houses, so if you have a particularly large detached building you might want to select a Sum Insured higher than the estimate the calculator provides.
  • If you’re in the Canterbury area and your property has been identified as having a CERA technical category rating (foundation requirements), then an allowance will have been made for this. This is indicative only and you should seek specific engineering advice for a reliable estimate of any costs.
  • The calculator uses typical building costs for standard finishes to provide an estimate.  If your home has significant special features and fittings, was built to a superior standard, is very large or has a high value, consider using other options to establish a better estimate of the rebuilding cost such as a registered property valuer or quantity surveyor, or select a Sum Insured higher than the estimate the calculator provides.
  • Factors such as the slope (steepness) of your land, the style and quality of construction are important to get right when using the calculator.  Seek advice if you are unsure what to enter in the calculator.
  • This calculator has been customised for NZI so it is important that you use the calculator provided by your insurer.

More about shared ownership

  • Owners of cross-leased properties need to consider how to cover shared assets such as driveways, fences and retaining walls. Check your property's Title documents for reference to a 'plan of flats' (or similar) that sets out the various areas the cross lease applies to, and 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. 

A few things to be aware of

This calculator provides an estimate Sum Insured for your home but the final decision is yours, so if you think your amount is not correct you can change it. This is general information and is not a recommendation, opinion or guidance.  If you would like a recommendation please contact a registered valuer or quantity surveyor.  This calculator information does not provide any advice or opinion on the extent or adequacy of the cover provided by Sum Insured insurance. This information is not personalised financial advice and does not take into account your particular situation. You must make your own decision on the Sum Insured that is appropriate for your circumstances.

The Cordell Sum Sure calculator is an independent tool. NZI doesn’t have access to the information you enter, or access to the estimate that it produces, so if you’d like to adjust your home’s Sum Insured, or add additional cover for retaining walls, Recreational Features like swimming pools and tennis courts or Special Features like bridges, you’ll need to contact us. It’s your responsibility to ensure that your Sum Insured is adequate.