When insuring your house it is important that you understand the different definitions for house insurance cover and how they affect your policy – these are reinstatement, replication and replacement.
Reinstatement is interpreted as replacing your home with a modern equivalent. Under this definition your insurer will reinstate an older home with a new structure of similar size and quality as the existing building. If the existing building has particular items that are not generally found in a standard modern home, like rimu skirting boards or a hardwood staircase, they will be substituted with modern materials. If you wish to have any such distinctive items included in a rebuild, these would need to be priced separately and added to your ‘sum insured’ as special features.
Replication means replacing your home with one that looks the same as the original. Most commonly used for historic buildings and heritage homes, replication is set up to replicate the original item or structure as closely as technically feasible and using the same or similar materials and practices. Facades may need to be replicated or older weatherboard profiles copied, for example. Because most or all of the building elements need to be handmade, ‘replication’ is many times more expensive than ‘reinstatement’.
Replacement means to rebuild a structure that is the same as the original. Prior to the Christchurch earthquakes, New Zealand was unusual in its adoption of ‘replacement insurance’. Most other jurisdictions have always been ‘sum insured’. The changes post-quake by our own insurance companies has simply brought us back in line with the rest of the world.
Under the old replacement method, if your house was destroyed it was replaced with a new structure of similar size and quality regardless of the cost. The insurer carried the total risk. The reversion to ‘sum insured’ means that the insurer has transferred some of that risk to the home owner.
Our registered valuers can advise on the different definitions in the context of your home, to help you make an informed decision on how you value it for your insurance.