Sum-insured valuations

Not worth the full price and light on detail. That’s what our two mystery shoppers thought about the valuation reports they got from Sum Insured Associates, one of five companies we got to provide sum-insured valuations. Our homeowners felt they could have been left severely underinsured if they relied on the company’s figures.

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The shift to sum-insured house insurance puts the responsibility for working out a home’s rebuild costs on the homeowner. Insurance companies provide online calculators, but they’re a guide only and the companies take no responsibility for the accuracy of the estimates they produce.

The alternative is to employ a professional to do the job. But our mystery shop of companies that offer this service revealed big differences in rebuild estimates.

We checked out five companies offering insurance valuations nationwide. We asked each company to provide valuations for two houses – a 160 square metre renovated 1911 villa in Grey Lynn, Auckland, and a 230 square metre renovated 1950’s family home in Karori, Wellington.

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Rebuild costs

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Mystery shop results

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Who can you trust?

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Passing the buck

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Industry views

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Where to from here

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Our view

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Valuation costs

Auckland house

Company Cost of valuation - $ Demolition costs - $ Rebuild costs (including demolition) - $ Provision for inflation - $ Sum insured (first year) - $
Sum Insured Associates 774.00 A not stated 576,170 not stated 576,170
Construction Cost Consultants 750.00 B 10,902 615,797 36,205 652,002
QV 517.50 50,370 760,426 86,961 847,387
Telfer Young 661.25 25,000 815,000 65,000 880,000
Prendos NZ 747.50 30,000 895,000 90,000 985,000

Wellington house

Company Cost of valuation - $ Demolition costs - $ Rebuild costs (including demolition) - $ Provision for inflation - $ Sum insured (first year) - $
Sum Insured Associates 774.00 A not stated 718,079 not stated 718,079
QV 650.00 40,710 949,210 86,825 1,036,035
Construction Cost Consultants 750.00 16,215 1,050,119 44,208 1,094,327
Telfer Young 868.25 41,000 1,084,000 94,000 1,178,000
Prendos NZ 747.50 88,000 1,103,000 93,000 1,196,000

Guide to the tables

  • Cost of valuation is the cost invoiced by the company. This may differ depending on property size and travel time for the assessor. A = Discounted to $387. B = Discounted to $549.
  • Demolition costs is the cost for demolition and removal of the material in the case of total loss of the property.
  • Rebuild costs is the total estimated rebuild cost including demolition costs where specified.
  • Provision for inflation is the allowance given for additional costs in 12 months’ time.
  • Sum insured (first year) is the total of the rebuild costs and provision for inflation.

What to check

If you use a professional for a rebuild valuation:

  • they should have indemnity insurance, be qualified, and belong to an industry body such as the Property Institute of New Zealand (valuers) or the New Zealand Institute of Quantity Surveyors
  • ask about their experience in doing residential insurance valuations in your location
  • check whether allowance has been made for professional and compliance fees
  • your report should explain the provision for increases in building costs and how this should be applied to your insurance policy.

Company profiles

Construction Cost Consultants is a professional quantity-surveying company. It’s been in business since 2010 and offers residential insurance valuations nationally. A registered quantity surveyor did our valuations.

Prendos NZ is a national property consultancy company in business since 1988. Staff members include registered valuers, quantity surveyors, architects and structural engineers. Its valuation team draws on data from its in-house quantity surveyors as well as the market in general. A registered valuer did our Wellington valuation while the Auckland valuation was peer-reviewed and signed off by a registered valuer.

QV (Quotable Value) is a state-owned enterprise. It was formed in 1998 and has usually been associated with providing market valuations by registered valuers and rating valuations for local authorities. It also provides residential insurance valuations.

Sum Insured Associates, one of the new companies in the sum-insured assessment game, was set-up in July 2013. Company director Scott Stevens did both our valuations. He doesn't belong to PINZ or NZIQS. His business card doesn't state his qualifications.

Telfer Young was established in 2000 when eight independent property valuation practices came together. It has registered valuers in 11 offices nationwide.

Liability and the law

The contracts used by some companies providing valuation services include clauses attempting to limit their liability – or in the case of Sum Insured Associates, accepting no liability of any kind. However, the Consumer Guarantees Act (CGA) requires services to be provided with reasonable care and skill. A business can’t limit its liability under the Act when providing services to consumers.

The limitation-of-liability clauses we’ve seen – which attempt to limit liability to particular amounts or exclude liability for consequential loss – risk misleading consumers about their legal rights under the CGA and should be removed. We believe contracts should clearly set out consumers’ rights under the CGA.

Providing for inflation

Your insurance isn’t just in case of a disaster tomorrow. It’s for anything that happens in the next 12 months until your policy renews. And in those 12 months – and right up until your house is rebuilt – costs will be increasing. That’s why it’s important a provision for inflation is included in your valuation report.

The provision for inflation used by quantity surveyors and registered valuers takes into account the time required for damage inspections, demolition, preparation and approval of proposals and plans, tenders and construction.

However, the provision for inflation usually excludes any allowance for delays because of the need to comply with the Resource Management Act.

Give your insurer the reinstatement cost, demolition cost and inflationary provision when you set your sum-insured figure. The total should be your sum insured. Not all the reports we got made this clear and not all insurers are asking for this detail.