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By Richard Godman
Manager Technical Underwriting, Consumer Insurance
6 December, 2017
Auckland Council recently revealed that rateable values for residential property have jumped on average 46% across the region.
The rateable value of a property estimates how much someone might pay for your house and land (its market value), but have no impact on insurance premiums, which relate to how much it might cost to rebuild your home.
But the market value of a property has broad implications for the financial wellbeing of many families, and the release of new council valuations do serve as a timely reminder to consider whether you have the right amount of insurance cover in place.
Why there's no connection between rateable value
and insurance premiums
Rateable values don’t affect insurance premiums because they are an estimate of the market value of the house and land together.
Insurance premiums only reflect the amount of insurance you have in place to rebuild your house (your ‘sum insured’).
The cost to rebuild your home would probably be similar no matter where in the country it was, but the value of the land means the sale price could be vastly different.
In some regions, like Auckland, council valuations will be significantly higher than the rebuild cost for a home, and using the rateable valuation for your sum insured could mean you are paying for much more cover than you will ever need.
But in other regions, the rateable value of your property might actually be lower than the cost to rebuild it. Using your rateable value as the sum insured might mean you don’t have enough cover to rebuild your house if it’s extensively damaged.
Even relying on the ‘improvement value’ portion of a council valuation alone is not recommended.
It’s often quite a rough estimate, and due to rising building costs, in many cases it wouldn’t be enough to replace your home if anything was to happen to it.
Insurance and rateable value both contribute to your
financial wellbeing
Even though there’s no relation between your house valuation and your insurance, both can have a big impact on your financial wellbeing.
Looking at the estimated worth of your home might lead you to all kinds of financial decisions – like the decision to upgrade, downsize or move, to refinance or pay down your mortgage or to use the equity in your home for another aspiration.
So it’s also a great time to consider whether you’ve protected your home with the right amount of insurance cover.
At Vero, we encourage customers to check and update their house insurance sum insured regularly. It’s quick and easy to get a rebuild estimate using the Cordell Calculator tool on our website, or if you want more certainty you can get a registered professional to assess the rebuild cost for you.
Vero customers are eligible for additional cover if they meet certain conditions, including checking their rebuild cost using an approved tool and properly describing their house to us.
If customers have met these conditions when setting their sum insured, we’ll give them 10% extra cover free in a natural disaster, or full replacement cover for damage caused by any other insured cause.
Want more information?
For more information, see Vero's House insurance options or use the Cordell Calculator to check your estimated rebuild cost. Or if you're ready to buy a policy or need personalised insurance advice, contact a broker or adviser.
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Today Vero announced an industry-leading policy benefit called SumExtra that will extend homeowners’ insurance cover in the event of either a natural disaster or other insured loss.
SumExtra offers customers who have personalised their sum insured based on an estimated cost to rebuild their home, additional cover in the event of a loss even if those costs exceed their sum insured amount.
The information in this article has been compiled from various sources and is intended to be factual information only. Full details of policy terms and conditions are available from Vero Insurance New Zealand Limited or your financial adviser. For advice on product suitability, please contact your financial adviser. While we take reasonable steps to ensure that the information contained in this article is accurate and up-to-date, it is subject to change without notice. Vero Insurance New Zealand and its related companies does/do not accept any responsibility or liability in connection with your use of or reliance on this article.
