Kevin Lampen-Smith
Wellington,
Your property is likely to be your most valuable asset and hence it goes without saying that would want to insure it.
If anything were to happen, like a fire or natural disaster, it can be hugely stressful emotionally and financially.
Lately, many insurance companies have been reviewing the way they insure and what they charge as premiums, as natural events are only becoming more common worldwide. If you are looking to buy or sell, it is important to think carefully about your insurance options.
Priority on To Do List
Insurance needs to be right up there on your ‘To Do List’ when buying a home.
A reputable lender will usually want proof that you’ve arranged property insurance before settlement.
Finding out about a property’s ‘insurability’ starts with talking to different insurance companies to get quotes.
Consider meeting with an insurance broker – an independent insurance expert who do not work for any particular insurance company.
If you have not owned a property before but you have contents insurance, contact the company that this insurance is with. Having an existing relationship with an insurer can help show others that you’re a ‘good risk.’
Insurers’ Conditions
An insurer will want to know details about the property, like its address, age, condition and what materials it’s made from.
If there is a licensed real estate agent selling the property, they can help you with this information. You can also ask if the property is currently insured and whether there have been any incidents at the property that could affect its chances of being reinsured in the future.
Ask whether the property has been subject to an Earthquake Commission (EQC) claim.
If it has, request more information and seek legal advice. Be aware that insurance companies are reassessing how they cover coastal or clifftop properties due to the increasing risk of environmental damage.
Changing risk
As the risk changes, the cost of premiums may increase, exclusions may be added, or insurance cover may be withdrawn for some properties.
The most common type of insurance cover is ‘sum insured’ – you decide how much cover you want, based on what it would cost to completely rebuild the property.
It is important to get this number right. Set it too high and you could be paying for insurance you don’t need, but set it too low and the pay-out may not be enough to rebuild the home.
While earthquake damage is covered by EQC, in order to qualify for it you must have valid private home and/or contents insurance that includes fire insurance.
If you are looking at an apartment, this insurance will usually be included in the annual body corporate fee.
Check this carefully before you make the offer.
If you cannot find a company willing to insure a property in which you are interested, it may be safer to walk away.
If you do find a place that an insurer is happy to cover, make sure that you read and understand the policy.
Do not leave any insurance matters to the last minute or fail to read the fine print.
If the insurer agrees to cover the property, and your offer is accepted, let your lender know immediately.
You will need the insurance to start on settlement day when the property officially becomes yours, even if you are not moving in that day.
For independent advice on buying or selling property, check out settled.govt.nz
Kevin Lampen-Smith is Chief Executive, Real Estate Authority based in Wellington.
(Picture Supplied)
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