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How much are your properties worth?

Property investors will soon have to put a dollar value on the cost of replacing their entire portfolios when their insurance comes up for renewal.

Friday, July 5th 2013, 12:00AM

by Susan Edmunds

And if they do not want to judge that by a property’s CV or an online calculator, that could come with a very large valuer’s bill.

All of the country’s insurers are changing their policies from "total replacement value", where the insurer pays out whatever is required to rebuild a home, to "agreed value" policies, where a set payout is determined and agreed on by the property owner and the insurance company.

Already, new AA Insurance customers are on the new style of policy and the rest of the country’s insurers will start switching renewing customers over the next couple of months.

The move gives companies more certainty about what they would have to pay out in the event of a natural disaster. The country’s largest insurance group, IAG, said reinsurance costs had doubled because of the Canterbury earthquakes.

IAG's New Zealand chief Jacki Johnson said reinsurance costs had risen to 15% of gross written premiums  in the first half of 2013 from around 8% in 2010. That cost was being passed on to consumers.

"Insurers [have been] told to step in line with other countries because, with Canterbury, they will have no idea of the total cost of the rebuild until it is finished and that is because of the total replacement policies," said Insurance Council chief executive Tim Grafton.

But Auckland Property Investors Association president David Whitburn said many property investors could be left vulnerable by the move. He said few would want to pay to have a registered valuer look at all their properties and a lot of people would take the DIY approach. “There will be a lot of guesstimates.”

He said some would end up under-insured and some would pay too much. “There will be a mix. I am worried that a lot of people will grossly under-insure.”

The fine print of many home loans stated that owners had to have sufficient insurance to rebuild a property in the event of total loss. Whitburn said that meant some property owners could end up in breach of their contracts and the banks had a track record of calling back such loans.

Consumer New Zealand warned it almost always cost more to replace a house than what it would sell for. Payouts would need to include the cost of clearing a site. Demolition can add a lot to a rebuild.

Terry Naylor, of the Property Institute, said his organisation, which represents valuers, had talked to insurers about absorbing the $500 cost of a valuation but had been unsuccessful.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

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