10 Dec 2019
Future proof your property’s insurance valuations

How has the process and importance of residential property insurance changed throughout New Zealand?

Historically, and understandably, the value of a residential property has been the most important element to consider when looking to buy or sell.

But with New Zealand’s rapidly changing environment and increasing risk of natural disaster, it comes as no surprise that obtaining home insurance for such events has become a critical factor.

This is so much the case that the availability of residential property insurance has leapt into first place for the most important factor to consider when buying or selling. But how has it changed, and how can you secure insurance for your own residential property?

What’s been happening with natural disaster residential insurance cover?

In light of New Zealand’s increasing rate of natural disasters, the Earthquake Commision (EQC) has implemented a number of key changes that affect residential property owners:

  • Increase of insurance cover: as of July 1st 2019, EQC has increased the total amount of cover provided in the case of natural disaster, from $100,000 to $150,000 (+GST). Any greater loss would be normally covered by your private insurer. An accurate determination of the Sum Insured is critical.
  • Longer time to make a claim: residential property owners can now take up to two years to submit a claim under natural disaster. This has increased from the previous time span of just three months. However, best practice is to always notify your private insurer and EQC as soon as natural disaster damage is noted.
  • Contents insurance: EQC have previously provided up to $20,000 towards claims on house contents. However, they will no longer provide this cover. Instead, residential property owners will have to submit claims to their own private contents insurer.

Insurance comes first – and risk assessment is the crucial factor affecting it

Although insurance policies have been created to support New Zealand homeowners, what has followed is an increasing difficulty to gain and renew affordable residential property insurance in some locations and circumstances.

Homes are being assessed in greater detail for natural disaster risk before insurance cover is accepted by private insurers. Risk assessment tools and procedures are expected to continue to grow and develop.

What does this mean for residential property owners? For a small proportion of residential property owners, insurance may be impossible to gain or become completely unaffordable over time. This can impact directly on both the future saleability and value of your property

Residential insurance cover is only a one year contract that may not necessarily be renewed. On the other hand, mortgage debt obligations may extend out over 20 years. Looking to the future, the ability to renew insurance every year at an affordable premium is an important consideration to underpin the dwelling and property value longevity.

If you own a residential property: record it

If your existing property is already insured, it’s more important now than ever to record its’ current condition in greater detail. In the case of natural disaster or fire, this will allow you to establish the true impact of any changes or losses.

There are three ways you can provide proof of the condition of your home pre disaster or loss:

  1. Photographic evidence: kitchens, bathrooms, bedrooms and living areas should all be photographed. It’s important to have a clear record of the interior and exterior condition – otherwise, it can be all too easy for insurance companies to potentially reject your claim and deny your home was in its said condition pre-loss.
  2. Floor levels: professionally measuring and recording the floor levels is paramount to present an accurate representation of your residential property. If you don’t have proof of a pre loss baseline condition before any damage, it could be deemed historic and your insurance will fail to cover the true costs of remediation.
  3. 3D property scan: having your home 3D scanned and represented digitally may be the best way to offer the highest degree of pre loss authenticity and reputability. This cutting-edge technology has recently become available to residential property owners.

Explained: 3D property scanning

A 3D property scan is the most modern way of replicating your home with Virtual Reality – providing in-arguable clarity. Replicating every detail and angle through point cloud data capture, every corner of your house is represented accurately.

What this means is that your portfolio of evidence is greatly strengthened, and the condition of your home is accurately shown – leaving no room for debating the severity of any damage.

We recommend: using a combination of all three methods to create irrefutable proof of the condition of your home. Ideally all together in an ‘electronic wallet’ of your house and property details that can be shared with your insurer and mortgagee.

If you’re looking to buy: seek clarity

What’s important for those looking to invest in residential property is gaining clarity around its associated risks, especially from natural disaster and potential climate change impacts. The last thing you want is to invest in a property and find out it can’t be insured in the future.

EQC have recently updated legislation to allow fuller disclosure of all historic information and claims made on a residential property. If you’re buying, you can now more easily gain clarity around the risk of the property and the steps taken to repair historic damage.

We recommend: applying directly to EQC to get disclosure of historical information surrounding a residential property.

Talk to a valuer today

Be prepared for natural and financial disasters. With the increasing changes around insurance, it’s a crucial time to put your property in a secure position, and know how to invest appropriately.

Whether you’re buying or selling, education and knowledge are paramount to know how to respond to changing environments.

TelferYoung’s valuers have a sound and ever-growing knowledge of New Zealand’s local authority regulations and general requirements, what’s at risk and what’s not. Talk to a valuer for advice about the potential risk of your residential property and for direction on what needs to be done to secure insurance.

Our qualified valuers at TelferYoung can help identify if you can attain residential property insurance. Talk to us today.