How much to insure building for?

[crc_error]

I am trying to work out how much to insure my IP building for. My IP is about 16 sq brick with tile roof. 3 beds 2 bath 8 years old.

Using calculators they are coming up with $216,000. This seems a little high? My friend built a 38 sq house 5 years ago for $230k give or take. I have also punched in the details of our PPOR which is about 18-20 sq and they are saying building should be $400,000.

Are these figures correct? Is building so expensive these days? How do others here work out how much to insure the building for?

 

[Raddles]

Hi there
you need to find out the building costs per square metre for where you have the property, you need to account for the costs of demolition (around $10k for a block of land), you also need to factor in the costs of replacing fences.
It is not in your interest to underinsure - ideally you should also have loss of rent for 12 months and loss of contents such as floor coverings and window treatments.
Having lost 2 properties in the Canberra bushfires, I know how important getting the insurance right is.
thanks

 

[crc_error]

so does $400k sound right for a 20sq home? in melbourne?

 

[Insan3]

Depends on the Building and Construction industry in the area.
Are they going to charge a motza to rebuild? In NQ, not uncommon for tradies to charge upwards of $80-100/hr. Those 2 bathrooms will then cost a bit with labour for carpenter, plumber, tiler, electrician, etc..

As Raddles said, you need to factor in everything. Place burns down, gotta clear rubble, pay dump fees, reprepare land, etc, etc.

Also, you don't want to get caught underinsured, as you could then face a coinsurance clause in the case of partial loss. Happened here in NQ with Cyclone Larry 2 years ago. Some places still not repaired. Coinsurance clause comes into effect if the Insurance Company deems that your property is insured for less than 80% total replacement value. They will then calculate the ratio of cover compared to 80% of full value......

ie: In your case, using rounded figures..
-Insured for $200,000
-Partial Loss occurs (Part of house burns down), $150k damage
-Replacement Value assessed at $400,000. You fall short of meeting 80% cover.
-Insurer calculates 80% value at $320,000
-Sum Insured/80% of Value = 0.625
-Insurer will pay you 0.625 x $150,000 = $93,750.
You're out of pocket approx $56,000 to make repairs.

In case of total loss, Insurer would pay out $200,000 (Total policy).

IMO better to pay a little extra premium, overinsure. Insurer will only replace what you had, compared to other places in area, so you can't get the Taj Mahal to replace it....

Might be worth chatting to a builder familiar with the area to give you a m2 rate, as well as demolition and removal costs, then add 10%

 

[Matt 72]

Hi,

I have always insured with AAMI due to the fact that my building insurance is unlimited in value. I have done the same for all of my properties as it takes the guesswork out of calculating what cover you need.

I am using their Landlord insurance which covers the building and I also have tenant protection as an optional extra. You can go on to the AAMI website and conduct your own quote which is a good option.

Hope this helps.

Matt