When was the last time you revised the level of insurance cover on your home? Due to building-cost inflation, if you've not reviewed the amount your home is insured for recently, your home could be severely underinsured.
How much should I insure my house for?
Your level of house insurance is called the Sum Insured. The sum insured should cover the total amount it would cost to rebuild your home in the event of a disaster or accident, it includes demolition costs, debris removal, professional fees and council fees. It doesn't include the value of your land, so it isn't the market or rateable value of your house or property.
Some insurance providers automatically increase their customers' sum insured values each year in line with rising building costs. But even if your insurer provides this service, it's still worth checking to see if you agree with their sum insured total.
Regularly reviewing your sum insured is especially important if you've made any improvements to your home. For example, your insurer won't know that you've added a new kitchen, or replaced your roof, which could have added significant value to your property.
There are a few methods for working out the cost to rebuild your home:
Online calculator
Many insurers, such as Tower, have links on their websites through to the Cotality calculator. The handy tool uses Cotality's construction costs data to give an estimate of the cost to rebuild your home. All you have to do is answer a few quick questions about your home, and the calculator does the rest.
Cost per m²
Using average building costs per m² is a quick, rule-of-thumb way of calculating the cost of rebuilding a home.
However, while it can give a ballpark figure, it can also be very misleading. Average per m² figures don't take into consideration the design details of a home, the true distribution of building costs and materials, or any demolition or site clearance that may be required.
Elemental estimating
Elemental estimating is the most thorough method of ascertaining the true cost of rebuilding your home. It covers every aspect of the rebuild, from plans and council permits, the specifications of each room in your home, through to your garden and landscaping, pool, external garaging, etc.
As it requires specialised industry knowledge, elemental estimating is a professional service best left to the experts. But while such a thorough report will, of course, cost more than a free online quote, it could prove invaluable if your home is of exceptional value or design.
Revise your sum insured annually
As each home is different, there is no one-size-fits-all replacement value answer. However, by revising your sum insured figure annually to ensure you've enough cover to rebuild, you can rest assured that if your home is destroyed, you'll not also face economic ruin.
Why it's also important to compare home insurance providers
While it's important to review your sum insured regularly, it's also a good idea to review your choice of insurance provider.
If you do feel you're paying too much, one of the easiest ways to reduce the cost of your premiums is to switch providers for a better deal. By comparing providers and shopping around, it's often possible to secure a better level of cover at a cheaper price.
To this end, Canstar reviews the best home and contents providers in the market annually. For more details, just click on the button below.