Affinity Insurance Services Pty Ltd Services

MARKET VALUE, REPLACEMENT VALUE, LOAN VALUE AND WHAT IS THIS INDEXATION? 

An Insurance policy with a replacement condition requires the building to be insured for the actual Replacement Value; that is a new for old sum insured. So why is this different to a sale value, and should the sale value always be higher?

The Building Sum Insured that is shown on a policy should be the replacement cost, new for old, of the premise. This should include removal of debris, architects fees, council fees, and any extra costs that would be incurred to make the new replacement building comply with the latest in council standards (such as water tanks).  Often clients have asked, well what about my driveway, do I need to insure my driveway? It doesnt burn... but when the 100 tonne excavator turns up to demolish the remains of the home, the client usually wants a new driveway afterwards, so be sure to insure for the full replacement value.

So can my Broker at Affinity Insurance Services give me a replacement value?

Unfortunately we are not licensed valuers, and as such we cannot provide you with a valuation. We do however have access to a broad range of tools and professionals which may assist you in determining your value. Some insurers that we utilse also provide a free valuation service as part of purchasing your policy.

CGU, together with Cordell, provide our Brokers with access to a Online Calculator to assist you in determining your building replacement value. We also have access to an online contents calculator service. Both of these services are available to our existing customers who have a CGU Home & Contents Policy. Please contact your closest office to speak with your regular broker if you would like to access this service.

Another Residential Insurer who targets the prestiguous home market (Homes above $500,000 replacement value), Chubb Insurance Company of Australia provide a free home valuation to their customers for the replacement value of the Building as part of their high service standard.

What about Commercial Buildings?

CGU have another service available to their commercial customers called CGU Right Cover which provides a building replacement assessment. If you have a policy with CGU through us, call our office and ask your broker how you can access these services.

Other insurers have other initiatives, some are free services, others are not. If you would like further information on how to obtain a correct building sum insured, call our office and speak with your broker, they will help you get on the right direction.

But my policy automatically increases every year by the CPI, do I need to review my sum insured?

The short answer to this is yes. When your policy increases every year, this is known as Indexing or Indexation and generally the value increases by the current CPI (Consumer Price Index) rate, typically between 3 to 5%. Reviews of the construction material prices has shown that the price of materials has increased at a much quicker rate, particularly for steel. In some cases in some regions, prices of materials have risen by over 80% in a 5 year period.

So if your building sum insured increases by only 3 to 5 % every year, and has done so for more than 5 years, statistically it would be likely that it is now underinsured. Re-Identifying your replacement value every 3 years is just one way in which you can take a proactive measure to ensure you keep up with rising building costs and so ensure that you do not end up under-insured.

What is Underinsurance?

For more information on underinsurance, please read our under-insurance FAQs.