The recent earthquakes we have had across NZ has given us a hindsight view of insurance cover, how it works and sometimes how it doesn’t work perfectly.
After the Christchurch earthquakes, I became involved in assisting a building owner who had a damaged building and was having some trouble with their previous Broker. One of the issues that quickly became apparent to me, was that unfortunately the clients building was under insured from the outset. Over time the building was written off as a total loss and the insurer paid out the full value that the building was insured for under the policy. But, the rebuilding costs were far greater than the amount of cover that had been arranged on her building.
What can we take from this? Well, when insuring a building, whether commercial or domestic, it is important you carefully assess the full replacement cost. This should include the cost to demolish, remove and dump the damaged property and clear the site, as well as retaining, fencing, driveways, decks, consents, professional costs, labour and materials. Inflation should be factored in from the time the cover is arranged until whenever it may be that the building is fully rebuilt.
Be aware that the actual replacement cost of a building, can be far greater than the initial build cost or an advertised build cost. In a natural disaster, as you can imagine alongside such a great demand, replacement cost can skyrocket, including demolition costs. With the example I gave above, the demolition alone ended up costing $120,000, which were paid for by the insurer, but this figure came off the final settlement to the client.
For commercial property, it is recommended that you check the value insured by obtaining a valuation for insurance purposes from a registered valuer. You can use valuations from registered valuers on your own home too or you can use a cheaper but less comprehensive estimation tool such as the Cordell calculator on the attached link: