Important change to Police Fire & General Home Insurance
Following the Canterbury earthquakes the insurance industry has been going through a period of significant adjustment – most notably the way in which New Zealand is assessed by the global reinsurance market.
Reinsurance enables insurers to spread the risk of loss among several insurers globally. Insurers aim to cover a portion of the business they hold and make arrangements with reinsurers to reinsure the balance for a portion of premium collected. In the event of a claim, the original insurer pays the whole amount of the claim to the insured and recovers the reinsured amount from their reinsurance providers.
Reinsurance changes have affected the entire insurance industry in New Zealand. You may have seen media coverage around changes other insurance companies have begun introducing. Lumley (NZ) Ltd, underwriters of Police Fire and General Insurance, has advised that a major change required to ensure reinsurance cover continues is for home insurance to be provided on a Sum Insured value only.
Insurance on a square area replacement basis will no longer be available for new home policies from April 22, 2013, or for existing home cover from renewal on July 1, 2013. Sum Insured cover will provide more certainty over the maximum amount payable under your policy. It also provides greater flexibility in the level of cover provided, to ensure all houses are underwritten appropriately.
Conversion from ‘Area Replacement’ to ‘Sum Insured’ Home Cover.
From renewal, if your home was previously insured on an area replacement basis, your new cover will be based on a Sum Insured value. This means that in the event of a claim being made, your home will be repaired or rebuilt to the same standard up to the maximum of your Sum Insured (including GST).
A default Sum Insured (including GST) will be calculated by our underwriters, Lumley Insurance, for existing policies. This will be sent out early this year for members to establish correct sums insured for renewal.
The default Sum Insured will use the average cost to rebuild a standard house in New Zealand and apply that to the floor area for your home.*
Default Sum Insured too high or low?
No two houses are the same and so the average cost of rebuild provided may not be appropriate for your home. This is why when you receive the advice of your default Sum Insured it is very important that you determine whether this will adequately cover all the costs associated with rebuilding your particular home.
The default Sum Insured provided may be too high or too low depending on a range of factors, so information will also be provided on steps you can take to help establish your Sum Insured, such as using an online calculator or employing a valuer or quantity surveyor. It is very important that you do this to ensure you are neither under nor over insured. Lumley have a licence that gives members access to the independent online calculation tool provided by Cordell, see: www.lumley.co.nz/home/suminsured. Cordell's tool will take you through a series of questions about your home and, based on your answers, will provide an estimate to rebuild your home at industry average building costs.
If you establish that the Sum Insured required for your home is different from the default amount provided, you’ll need to advise us so we can update your policy at renewal and make any necessary premium adjustments.
If you don’t provide us with a different Sum Insured value, the default Sum Insured value will be applied from renewal of your home policy on July 1, 2013.
* The default Sum Insured calculation is a standard methodology applied to all homes insured with Lumley. It applies the average cost to rebuild a standard house in New Zealand ($2000 per square metre of living area and $1000 per square metre of non-living area) to the floor area you have previously provided for your home. Other than using the area of your home, the calculation of the default Sum Insured will in no way be personalised for your circumstances or particular home. Neither Lumley nor Police Welfare Fund Insurances Ltd guarantee the default Sum Insured will be sufficient to cover the rebuild of your home.