Hi all,
I've just purchased my second IP in Tamworth. The house is a basic 3 bedroom, 1 bathroom brick veneer. The purchase price was $255k.
When I phoned the insurance company to organise cover I was told that it should be insured for $320k as this is how much it would cost to replace the house if it was razed to the ground. Am a little confused by this as it's more than the purchase price which obviously also included the land.
I've looked at a few online calculators to see how much insurance cover I should have but the amount on each website varies considerably. Is there anyone who can tell me how I should calculate how much to insure for?
Thank you,
Sundance
Hi Sundance;
I can't offer you an answer on your insurance, but wanted to ask, what made you choose Tamworth?
You need to have sufficient insurance for replacement. Don't forget if your house burns down you have to pay to have it demolished and taken away. Then the rebuild. Most insurance covers accom while rebuilding too.
You'll probably find the cost to insure for $50,000 less is very minimal anyway. And if the insurance company feels you've under insured by 25% they'll pay you 25% less than the claim amount. Why risk it?
Who is your building insurer when you settled the property and what was the amount insured? Or has settlement not taken place yet?
Regards
Shahin
TheFinanceShop | Elite Property Finance
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I'm with catalyst.
It's better to overcompensate then under.
I remember how many people were under insured a decade ago during the Canberra bush fires. A scary thought.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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Exactly .. you have to demolish (which requires a permit which costs, and the demolition contractors which also costs). Also permits for the rebuild are needed.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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Catalyst and Jamie – good advice from you guys as always. Will keep it insured for the $320k as is. Hadn't really thought about the demolishing and being taken away side of it before. I've also just had a look at how much my PPOR is insured for and I'm going to increase it tomorrow as I feel it's underinsured.
Shahin – insurer is NRMA. I also have PPOR and IP1 insured with them. Settlement takes place tomorrow.
tlm 1987 – why did I choose Tamworth? I wanted to buy regional and I liked the fact that Tamworth was a big town with several industries and sources of employment. The houses are also reasonably priced. Before I made an offer on it I had about 5 houses picked out in regional areas of NSW – Dubbo, Wagga, Bathurst and Inverell. While trying to decide which one to make an offer on, there was a price reduction on the Tamworth property so I went with that. It was a bit scary as we bought sight unseen.
Cheers,
Sundance
Ok you need to make sure that the sum insured is equal or more than the valuation amount for the building. At $320k you should be fine.
Spend a couple of bucks more and go for the higher amount.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Ahhh – Tamworth settlement today. It just clicked!
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie M wrote:Ahhh – Tamworth settlement today. It just clicked!Cheers
Jamie
Yep, it's me. Very excited today!!!!
Gotta say I absolutely hate it when the insurance companies ask me how much it would cost to rebuild. Those not regularly in the business of building things would not know. I'd rather them keep a spreadsheet guiding them on the latest rebuild costs and advise me accordingly. It's also very easy to forget things like the cost of replacing driveways and paving, pergolas, carports, garages, fencing, washing line, and gardens.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I tend to use AAMI because on building insurance they do full replacement cover so you do not have to worry about being under insured.
Many Australians in the past have been underinsured which has left people under insured by thousands in some cases. Also stick to the major insurers my experience is that they pay out
Nigel Kibel | Property Know How
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Agreed – AAMI is great. They won't insure all kinds of properties, but I use them for anything that they will insure.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM wrote:Gotta say I absolutely hate it when the insurance companies ask me how much it would cost to rebuild. Those not regularly in the business of building things would not know. I'd rather them keep a spreadsheet guiding them on the latest rebuild costs and advise me accordingly. It's also very easy to forget things like the cost of replacing driveways and paving, pergolas, carports, garages, fencing, washing line, and gardens.Thanks very much JacM. Once again all the things you forget to take into account when insuring. Will take it onboard.
Nigel Kibel wrote:I tend to use AAMI because on building insurance they do full replacement cover so you do not have to worry about being under insured.Many Australians in the past have been underinsured which has left people under insured by thousands in some cases. Also stick to the major insurers my experience is that they pay out
Thanks Nigel, great advice. Will check AAMI out.
Hi Jacqui,
Do you know who might be a good insurer for a block of 6 x timber flats in Brisbane? All on one title. above flood levels..
Cheers,
Don
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