Why you shouldn't skip the insurance valuation

It’s a big part of what makes little old New Zealand so special, but when our landscape turns wild, the risk of natural disasters (like earthquakes, floods, and fires) can be very real.

As a property owner, insurance valuations offer a crucial line of defence against these events, helping you make sure you’ve got the right level of cover for your assets.

Understanding the ins and outs of insurance valuations can take time and effort, so we’ve pulled together this cheat sheet to summarise the stuff you really need to know.

Why are insurance valuations important?

Having an accurate insurance valuation helps give you peace of mind that should disaster strike, you’re well covered against any potential losses.

Being underinsured, meanwhile, can leave families and businesses vulnerable, and potentially facing massive financial repercussions in the event something does go wrong.

How are insurance valuations calculated?

There are a few factors that play into it:

1. Location: If your property’s in a high-risk zone, like earthquake-prone areas or floodplains, that’ll typically translate to a higher insurance premium. That’s thanks to increased exposure to natural hazards.
2. Building materials and construction: The materials and construction methods used in the build of your property have the potential to significantly impact its replacement cost and valuation.
3. Market trends: Changes in construction costs and market trends can influence the replacement value of properties over time. It’s a good idea to get your insurance valuation reassessed every year or so, to give you a good idea of long-term trends, and a clear understanding of the future.

Online calculators vs. qualified professionals: Which is best?

As the owner, it’s down to you to get your insurance valuation sorted, and make sure that it’s reviewed regularly. So what are your options?

Most insurers will happily rely on valuations using online calculators, like the one from Cordell. Tools like this are free, and use public records and estimation of the potential rebuild cost.

Increasingly, though, insurance companies are encouraging clients to use qualified professionals, such as licensed valuers or quantity surveyors, for more accurate valuations.

These experts have the knowledge, expertise, data and tools to assess properties comprehensively and determine appropriate insurance coverage. They’ll take an in-depth look at factors like building specifications, depreciation, market trends and predictions, so you know you’re getting a really reliable valuation report.

The crew over at Cost Consultants are one great option in this space — and when you chat to them, be sure to ask about the Squirrel discount.

Why is it so important to get your insurance valuation reviewed regularly?

When it comes to insurance valuations, it’s not a “one and done” scenario.

Best practice is to have your valuation reviewed and updated regularly (particularly after any major renovations) to make sure it reflects changes in property value, construction costs, and risk profiles.

Failing to do so can leave you underinsured, or over-insured, and that could seriously compromise the effectiveness of your rebuild cost in a disaster.

Most insurers now recommend that clients get a valuation done roughly every year, protecting you against inflationary pressures, and making sure to acknowledge any alterations or additions to properties.

To sum up, insurance valuations are one of the best tools you’ve got to help mitigate risk when it comes to owning property

Having an idea of the factors that can influence valuations, by engaging professional valuation services and ensuring regular reassessment and awareness of the market, means you can make informed decisions to help safeguard your most important assets.

The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. Squirrel shall not be liable or responsible for any information, omissions, or errors present. Any commentary provided are the personal views of the author and are not necessarily representative of the views and opinions of Squirrel. We recommend seeking professional investment and/or mortgage advice before taking any action.

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