Years of planning and saving go into buying a new home, and it might be the greatest asset you’ll ever own – so it goes without saying you’ll want to protect it.
Many home buyers leave organising insurance until last in their buying process, but depending on the age, type, location and condition of the property you’re buying, it can take longer than you think.
The best time to start thinking about insurance is as soon as you find a house you’re interested in – here are our tips for some things to think about.
1. Find out about the property’s insurance history
When you find a property that you are interested in buying, find out everything you can about things that might impact insurance.
The property’s size, age, condition, location and the materials it’s made from are all things that might affect the availability and cost of insurance.
It’s also a good idea to find out from the vendor what company the house is currently insured with, if the current insurer has imposed any special terms, how much the premiums are, and any claims history (especially if it’s suffered major damage in the past).
2. Research your insurance options
If you’ve found a property you’d like to make an offer for, start thinking early about what type of insurance suits your needs.
Start by checking that insurance is available on the property you’re looking at. You might want to add an insurance condition to your sale and purchase agreement (along with any other conditions like finance or building reports). That way you won’t get stuck purchasing a property that you can’t get cover for.
3. Organise your insurance early
Shop around to make sure that you can get cover and that you’ll be able to afford your mortgage and insurance premiums. If your insurance needs are complex, you might want to get advice from an insurance broker or adviser to find out what you need to know and get the best cover for you.
Banks will usually make house insurance a condition of any lending, so if you’re taking out a mortgage you’ll need to get your insurance sorted before you can settle.
It’s important that your insurance comes into effect from the day the property becomes yours (settlement day) even if you aren’t planning to move in straight away. This way you won’t be stuck footing the bill for something that happens before you’ve moved in.
4. Make sure you get your sum insured right
Most house insurance in New Zealand is sold on a ‘sum insured’ basis – meaning the maximum you would get paid out if your home is damaged is the amount you have specified on your policy.
It’s important to get your sum insured right, because if it’s too high you will be paying for insurance you don’t need, and if it’s too low your insurance might not cover the cost of rebuilding your home if it’s destroyed.
The sum insured should reflect what it would cost to fully rebuild your home and include the cost of additional structures on the property such as the deck and the driveway, along with additional costs like demolition and debris removal, legal and professional fees.
There are several ways to calculate your sum insured including using a tool like the Cordell Calculator, which will give you a rough idea of how much your house might cost to rebuild. Or, you could get a registered valuer or quantity surveyor to provide you with a rebuild estimate and use that to set your sum insured, especially helpful if your home has special features or is one-off architecturally designed.
Buying or moving into a new home is an exciting milestone for many New Zealanders. With a bit of planning you can ensure that the process runs smoothly and that you’re not caught out by a last-minute hassle to get insurance cover to complete your purchase – and you’ll know that you have taken steps to help avoid life’s little disasters that could leave you financially out of pocket.
