Home insurance quote - unusual rebuild cost

kaleidoscope on 14/04/2019 - 22:03
Last edited 16/04/2019 - 08:04

Hello all,
Looking into home & content insurance for my upcoming first home. I noticed the estimated cost for rebuild is unusually high compared to build cost + improvements. To give an understanding, say my build cost + improvements are around $300,000 for the house, but insurance company's estimate for rebuild is over $700,000. How is this possible? I understand rebuild may incur certain additional costs, but this is over 2x time the build cost it self. Am I missing something?

Suncorp & their group of companies estimate: $720k+
CBA: $720k+
budget direct: $720k+ ($580k build cost + $43k professional fees (whatever this means) + $34k demolition cost + $65k gst)
NAB: allows us to enter a replacement cost of our own.
racv: website crashes…

Thanks!

==== Update 1 ====

So after talking to couple of providers, it appears that they're defending their position on the insane value with various reasons. Few of my friends however advised me, to either visit a branch or get a quotation over the phone as the online application is designed to assume the worst case and therefore the coverage can be unusually high.
When I do get insurance, I'll drop another update here on how it goes.
Thanks everyone who has responded and shared their experience.

Financial

Comments

  • Donaldhump on 14/04/2019 - 22:10
    +1

    what i am saying may be rubbish, but it may include the cost of the land even though this has nothing to do with it.

    if this is complete nonsense disregard, but some one mentioned this to me once i think

    • kaleidoscope on 14/04/2019 - 22:18

      Thanks, I will check on this. I've heard from someone working for NAB that when they do insurance, they either take 50% from land + home valuation or 80% of build + improvement cost itself for the cover amount. Neither of those figures are even close to estimates from other companies, which I found really confusing.

  • [Deactivated] on 14/04/2019 - 22:20
    +2

    Depending on your situation, if your house is uninhabitable you will probably just buy a new existing house, as it would probably take over a year to rebuild (typical build times are around 6 months but you will need to get the house designed, building approvals, surveys, demolition etc).

    The insurance company also covers your contents and may also cover you for rental accomodation while your place is being rebuilt.

    • kaleidoscope on 15/04/2019 - 09:48

      Thanks, that makes sense to cover for rent while its being built although I wish they showed a breakdown of the cost to get an understanding. I’m going to talk to them over the phone or visit a branch to find out all of that.

      • [Deactivated] on 15/04/2019 - 12:33
        +1

        You need to read the PDS to see if they do cover rent or not. Some will, some won't.

  • Stewardo on 14/04/2019 - 22:37
    +2

    I could be wrong but I thought $700k was the maximum they would pay out.
    So things that would go on top of the build cost would be temp accommodation, the contents that are not part of the house ie tv computer fridge furniture could easy be 80k+
    Demolition, hazard reduction, clean up, planning permission, inflation etc

    • kaleidoscope on 15/04/2019 - 09:56

      I thought the contents be valued separately though. But yeah the other added costs are somewhat insane.

  • mskeggs on 15/04/2019 - 06:13
    +1

    It is how the insurance companies make money.
    They refuse to insure for less so maximise their premium revenue.

  • Hellfire on 15/04/2019 - 06:44
    +1

    Insurance companies work off a worst case scenario for the replacment amount. They have to factor things in like changes in building code (things like bushfire related changes have made houses in those areas cost a lot more to build), shortage of trades people (build price can go up 50% because of this), shortage of build material, delays in demolition and cleanup, delays in starting construction. All this time you need to be housed in temporary accomodation.

    I've also seen people over estimate the size and quality of their house using the calulators wich also pushes up the cost and the default settings are probably too high for most housing estate builds.

    Budget gives a good breakdown there. Professional fees are things like architect, engineer, surveyers, etc.

    Premium doesn't change a lot based on the total replacement cost because it's such a rare event. It's better to pay a little more (or get total replacment cover) than be short if something terrible happens.

    • kaleidoscope on 15/04/2019 - 09:54

      Thanks for detailed explanation. I tried with few different numbers through nab’s estimation as they allowed anything we entered and the premiums were varying from 600-1100 based on my initial thoughts (300k) to extremes (720k). Going to talk to couple of these companies to find out more.

  • GangGang on 15/04/2019 - 07:17
    +1

    I asked the same question years ago. It came down to unexpected costs as well. If I remember correctly, it doesn't mean you recieve $700,000 to rebuild your home. It's the maximum payout the insurer will give.

    • kaleidoscope on 15/04/2019 - 09:50

      How did you go at the end? Did you negotiate for a better deal or decided to roll with it as is? Thanks!

      • GangGang on 15/04/2019 - 12:58
        +1

        I can't remember what figure I had. All I remember was that I couldn't lower it and I just went ahead with it. I'm sure it was nrma. I think all insurers are the same. Just find the best valued one.

  • voiletmay on 15/04/2019 - 08:35

    The demolishing/removal of old property is always a lot. We asked about this a few months ago and was told it was something like twice or three times the cost of the new build.

    • kaleidoscope on 15/04/2019 - 09:50

      😢

    • mskeggs on 15/04/2019 - 20:54
      +2

      Assuming you don’t live in a nuclear reactor, that is nonsense.
      $20,000 would be a costly demolish and clear.

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