House sum insured in NZ: rebuild cost or market value?

A rebuilding sum insured is not the property's sale price

If your house policy uses a rebuilding sum insured, base the amount on the cost of rebuilding the insured property, rather than its market value, purchase price or council rateable value. Those figures do not tell you what reconstruction would cost. AMI's sum insured guidance makes this distinction explicitly.

First check the type of cover you actually have. ICNZ describes fixed sum insured, indemnity and total replacement cover as different approaches. This guide focuses on preparing a rebuilding estimate for sum insured cover; it does not convert another settlement basis into replacement cover.

The sum insured is also not a promise that every accepted claim will pay that full amount. The damage, settlement provisions, excesses and applicable limits still matter. Keep the amount beside the wording that explains it.

Build a property record before choosing a number

Reconstruction involves more than materials and labour. AMI's explanation includes demolition, debris removal, compliance costs, professional fees and GST. ICNZ's calculating guide also considers property size, construction, location and outdoor features.

Make a short record you can use when checking an estimate:

• The buildings: note floor area, construction materials, bathrooms, garages and outbuildings. Mark any measurement you still need to confirm.
• The site: describe slope and access, then flag anything an estimator may need to inspect rather than assume.
• Fixed and outdoor features: list fitted equipment, decks, driveways, pools and retaining walls. Ask where each belongs in the estimate and policy.
• Changes: record additions and renovations since the last estimate, with plans or other supporting records where available.

This is a record of inputs, not a valuation. Do not guess at an unfamiliar construction detail merely to complete a calculator field. A question marked “needs confirmation” is more useful than a confident but incorrect answer.

Keep the assumptions with the result

An insurer-linked calculator can help you prepare an estimate. AMI cautions that its linked tool does not replace a registered property valuation or quantity surveyor estimate. ICNZ points to professional help for complex properties. Ask which method is appropriate if your home has unusual construction, extensive features or details a standard tool cannot describe.

Save the date, inputs, output and any exclusions together. Then compare that record with a previous estimate: did the house change, did you correct its area, or did an assumption change? A new total without its context is difficult to assess.

Fictional illustration: a homeowner uses an old floor-area record in a calculator, then notices it predates an extension. They correct the inputs and ask how a retaining wall is treated before discussing the sum insured. No rebuild price, premium or claim result is implied.

Compare the estimate with the schedule and wording

A feature included in a rebuilding estimate is not necessarily covered without a separate limit or listing. ICNZ explains that retaining walls and recreational features may have sub-limits or need additional cover. Ask the insurer to identify the relevant provision for your property.

1. Check that the insured address, building details and recorded features match the estimate.
2. Ask what the sum insured includes, which features have separate limits and whether anything needs specifying.
3. Clarify the settlement basis and any conditions on extensions to cover; do not assume an advertised feature applies to your policy.
4. Record the agreed next action and review the amount at renewal or after relevant property changes.

Keep your movable belongings in a separate contents inventory. For a broader review, explore personal insurance topics and the home-loan commitments scenario. Contact James with a short question about your review; ask him to confirm the advice scope and whether a valuation specialist is needed. The article cannot set a suitable sum insured for your home.