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Buildings
Building Insurance
Building insurance, as the name suggests, is a type of insurance that provides financial protection for your building or physical structures against a range of risks, including but not limited to, fire, flood, storm damage, earthquakes and other unexpected events.
Why is building insurance important?
Building insurance is crucial for a few reasons. Firstly, it safeguards your investment. Buildings often represent a significant financial investment, and it’s wise to protect this against potential threats.
Secondly, it offers financial security. In the event of a disaster, the cost of repairing or rebuilding can be overwhelming. Building insurance ensures you won’t have to bear these costs alone.
Finally, having building insurance can also be a requirement for obtaining a mortgage. Most banks and lenders in New Zealand require proof of building insurance before they offer any financing for your property.
It’s crucial to have building cover if you:
- Own a property
- Have a mortgage
- Lease your property
- Own a business premises
What does building insurance cover?
Building insurance, also known as material damage insurance, generally covers:
Physical structure
This encompasses any damages to the physical edifice of the building, including the walls, roof, and floors. Coverage is typically provided for damages resulting from unforeseen events such as fires, storms, or vandalism. However, it's crucial to note that certain significant events, like earthquakes or floods, may require specific additional coverage, particularly in certain regions of New Zealand that are more susceptible to these natural disasters.
Permanent fixtures & fittings
These refer to elements that are integrated into the building and cannot be removed without causing damage. This could include items such as the heating system, built-in kitchen appliances, or fitted wardrobes. Should these fixtures and fittings get damaged due to an insured event, your building insurance would cover the costs of repair or replacement.
Additional Structures
Building insurance often extends to other structures connected to the property. This includes structures like garages, fences, and sheds. It's important to remember that the specifics of what's covered can vary from policy to policy, so it's always essential to understand the terms and conditions laid out by your insurance provider.
How much does building insurance cost?
Building insurance premiums are calculated on several different factors including:
- Rebuild estimate
- Age
- Location
- Construction Materials
Building insurance in NZ typically costs between 0.2% to 0.5% of the rebuild value of your building per year.
Types of Building Insurance in NZ
Just as buildings come in all shapes and sizes, so too does building insurance. It’s essential to understand the different types of building insurance available, each tailored to fit various needs and situations.
Commercial Building Insurance NZ
Commercial building insurance is designed specifically for properties used for business operations. This could include offices, retail stores, restaurants, and more. The policy generally covers the building itself, including any structural elements and permanent fixtures. It can protect against a wide range of risks, such as fire, storm, theft, and other unforeseen damages.
Industrial Building Insurance NZ
Industrial building insurance is designed for properties used for industrial purposes. These could include warehouses, manufacturing plants, or storage facilities. Similar to commercial building insurance, this policy covers the building, its structural components, and permanent fixtures against damages.
Body Corporate Insurance NZ
Body corporate insurance, also known as strata insurance, is a type of insurance that covers properties with multiple owners, such as residential or commercial strata buildings. The policy generally covers common areas and shared structures, including the building itself, common property like lifts, swimming pools, car parks, and even the owners’ fixtures within individual units.
Apartment Building Insurance NZ
Apartment building insurance is designed specifically for residential properties divided into multiple units. Similar to body corporate insurance, this covers not only the building’s structure but also common areas like lobbies, stairs, and gardens.
Who needs building insurance?
Essentially, anyone who owns a multi unit, commercial or industrial property should consider building insurance. This includes landlords and business owners with their own premises. If you have a mortgage on your property, your lender will likely require you to have sufficient building insurance. Even if your property is fully paid off, building insurance can protect your valuable investment from unforeseen circumstances.
The amount of building insurance you need typically depends on the ‘rebuild cost’ of your property – that is, the amount it would cost to completely rebuild your property from scratch. This includes materials, labour, architect fees, and so on. It’s crucial that this figure is accurate because if it’s too low, you may not have enough to rebuild, and if it’s too high, you’ll be paying more than necessary in premiums.
As a rule of thumb, you should review your building insurance whenever there are significant changes to your property or your personal circumstances. For example, if you’ve made major renovations to your home, your rebuild cost may have changed and you might need to adjust your coverage. Similarly, if there’s been a significant event like a natural disaster in your area, it might be a good time to review your policy and make sure you’re adequately covered.
How Do I Calculate the Rebuild Cost of My Commercial Building?
Calculating the rebuild cost of your commercial building is a complex process. It’s more than just a matter of knowing the size of your building and the materials used. It involves a deep understanding of construction costs, building regulations, and even local conditions. Here’s a breakdown of how you can accurately calculate the rebuild cost of your commercial building.
A professional insurance valuer is an expert in estimating the value of a property. They’re familiar with building regulations, construction costs, and many other factors that could influence the rebuild cost of your commercial building.
Using a professional insurance valuer can help ensure that the rebuild cost is accurately calculated. This not only provides you with a reliable basis for your building insurance coverage but also ensures you are not overpaying or underpaying your premiums.
Insurance valuers consider a range of factors when calculating the rebuild cost of a building. These include the building’s age, size, materials used, location, design, and more. They also take into account external factors like labour costs, professional fees for architects or engineers, removal of debris, and even compliance costs with any changes in building codes or regulations.
An insurance valuer can also assess the indemnity value of your building. The indemnity value is the cost to repair or replace the property, less a deduction for wear and tear or depreciation. This essentially represents the ‘used’ value of the property and can often lead to a lower fire services levy, which funds firefighting and emergency services.
While it might seem tempting to estimate the values yourself or use online calculation tools, the cost of inaccuracies could far outweigh the cost of a professional valuation. A professional insurance valuer provides a detailed and accurate appraisal, ensuring that you have the right level of coverage for your property and that you’re paying the correct amount for your fire services levy.
How do I get proof of building insurance?
You can usually get proof of insurance same day when you purchase insurance through Gerrards. Once you have purchased your building insurance policy, the insurer will provide you with a certificate of insurance. This document serves as proof of your coverage and details the terms of your policy, including the start and end dates, the covered risks, and the insured amount.
Acquiring a building insurance policy from traditional insurance brokers may require a few weeks, a delay that could create problems for people or businesses who need instant insurance proof.
To obtain insurance coverage promptly, contact us. We may require you to provide some fundamental details about your building, such as:
- The address of the building
- Types of tenants
- Rebuild cost
- Construction materials
- Age
What does building insurance not cover?
Building insurance provides comprehensive coverage, but there are some things it typically doesn’t cover:
General Wear and Tear
Over time, buildings naturally deteriorate. This might include things like faded paint, worn-out carpets, or old wiring. Building insurance generally won’t cover these ‘wear and tear’ costs. It’s designed for sudden and unforeseen events, not gradual ageing.
Negligence
If damage is caused by a lack of maintenance, it likely won’t be covered. For example, if a leaky pipe has been left untreated and causes water damage, the insurance company may reject the claim.
Deliberate Damage
If damage is caused intentionally, it won’t be covered by building insurance. This includes damage caused by the property owner or by someone acting with their consent.
Acts of War or Terrorism
These are typically not covered under a standard building insurance policy. You might be able to get coverage for these events through specialized insurance, but it’s not usually included.
Certain Natural Disasters
While many natural disasters like fires and storms are covered, others like earthquakes and floods may not be included in a standard policy, particularly in high-risk areas. You may need additional coverage for these.
Other common questions about building insurance
The ‘sum insured’ is the maximum amount the insurance company will pay out for a claim. It should represent the rebuild cost of your property, not the market value or purchase price. This is why it’s crucial to have an accurate valuation of the rebuild cost.
An excess is the amount you agree to pay towards a claim before the insurance company pays the rest. Choosing a higher excess might lower your premium, but it means you’ll have to pay more out of your pocket if you make a claim.
Yes, most insurers allow policyholders to make changes to their building insurance policy. You might need to do this if there are changes to your property that could affect the rebuild cost, such as renovations or extensions.
If you’re underinsured, it means the coverage amount is less than the rebuild cost of your property. In this scenario, if your property is damaged, you may have to bear some of the repair costs yourself. This is known as the ‘principle of average’, where the insurer will only pay the same proportion of your loss as your sum insured bears to the full replacement cost of your property.
Yes, you can cancel your policy at any time. However, if you cancel after the cooling-off period (usually about 14 days from the policy start date), you might not receive a full refund of your premium.
