When Your Home Is Destroyed By Earthquake Or Other Natural Disaster How Can You Receive The Best Possible Payout From Your Insurance Company (Without A Big Fight)?
Tens of Thousands of $, Even More, Could Be The Difference.
Has the Christchurch earthquake/s or another disaster destroyed your home?
We look at some of the photographic images of the destruction of buildings in Christchurch and the surrounding area and the jaw drops.
Because information is easy to find on the internet, I’m contacted regularly from Valuers, Loss Adjusters, Insurance Companies and from people just like you who want to know how to get an accurate replacement cost of a or their heritage or period New Zealand home, homestead or building. In particular, as you can imagine, since the Christchurch earthquakes a steady flow of enquiries have come out of Canterbury – prompting me to write this article. But also because of the Christchurch disaster there has become a real awareness of not only ‘if it can happen in Christchurch it can happen anywhere and to me’ but also ‘am I sufficiently covered by my current insurance policy – even my current insurance company’?
In Christchurch, a raft of issues are raising their heads. Firstly, there is the general population that have been shell-shocked and traumatised. Then, there are the on-going after-shocks that terrorise people and reminding them it may not be all over yet. Then, there is the uncertainty over not just immediate living conditions but also the longer-term recovery – for themselves and their region. And finally, as the dust is starting to settle there are concerns about being adequately covered by insurance and settling claims without the added stress of having a fight with the Insurance Company.
Believing you’ve carried out due diligence and made every effort to make sure your house is adequately covered, some Insurance Companies, fairly or unfairly, have a reputation of ‘doing what it takes’ to minimize their loss. This is made worse by the fact that some of their customers are generally not in the right frame of mind after a disaster to best pursue and receive what they are entitled to. Obviously insurance policies vary from customer to customer and company to company but however, the process I’m about to suggest will arm you with facts and knowledge that will allow you to settle your claim with the fairest possible outcome in the quickest possible time.
You need to be able to say to your insurer, “here are the facts and replacement cost of my property as prepared by an independent and reputable third party”. I.e. a report that if not impossible, is very hard to argue against. This way there is no need to get into a fight or a price/payout argument. Just produce your facts and demand a settlement based on that – less stress and agro.
The question is, how can you find out the true replacement value of your historic or period home? It’s not as though there is a department of statistics for the current per square meter rate for the average building like that. Although I have heard that some insurers are trying to apply today’s average rate to older buildings in order to reach a reduced value settlement.
If you do have a ‘replacement policy’ and intend to rebuild on the same property, you probably wouldn’t want the exact same layout as you had before, but that is not the point here. You need to know what your home would realistically cost to rebuild so that it looks and feels the same, or as close as reasonably possible, as it did before. Remember that most people buy and live in older period homes because they love the look and feel of them – even if they are old, cold and hard to heat and require a lot more maintenance (note; new period replacements are the opposite to that – they are easy to heat and keep warm, easy to look after and almost maintenance free for the first decade or two). Having an original New Zealand period home is more of a love affair with the architectural style because the straight sharp lines of modern and contemporary alternatives leaves you cold – no pun intended. Generally there is only one aspect of a replacement rebuild that can’t be replicated, and that’s the use of native timbers – they are simply not as readily available as they once were.
When all or part of your heritage or period house (say pre 1950) is destroyed by fire, earthquake or any other natural disaster, here are the steps I’d take to get the fairest possible payout from my insurer – this assumes you are in fact insured:
- Notify your insurer in writing of the damage as soon as you become aware of it – this goes without saying.
- Confirm with your insurer your policy details i.e. have them forward you a copy of your policy – this assumes your copy has been lost or destroyed.
- My next best advice – and this is an investment not a cost; Take your details to your lawyer and have them advise you on your entitlements. Don’t rely on your insurer. Point: Employing a professional to assist you here may even form part of your claim and could be included as part of your payout – and they’re emotionally detached. By not employing one, even for a bit of guidance, is a false economy.
- Next, identify a reputable architect or architectural designer. In order for you to know exactly what the payout should be, you need to have concept plans and specifications prepared of the ‘written off’ house, even though you may have no intention of using these plans to rebuild with. Once you have these plans the rebuild can be estimated accurately.
- The architect or architectural designer will provide you with a proposal or quote for their work to take to your insurer. You’ll need your insurer’s approval to employ the architect or architectural designer because your insurer will probably be paying for it as part of your replacement policy.
- Assuming your insurer approves the architect’s or architectural designer’s proposal the architect or architectural designer will measure and take information from the old house and prepare plans and specifications for the same.
- The architect will then forward the plans onto a quantity surveyor or builder for them to provide an accurate estimate at today’s values of the cost to rebuild your damaged house.
- This is a service, ‘prepare concept plans and price the damaged or destroyed house’ that Moss Brothers are already currently performing for Canterbury folk, so we can help you too.
- Armed with a concept plan and specification of your old house, and a price to rebuild, you can now confidently negotiate a fair settlement sum. As you can imagine, these facts and figures, providing they are prepared by reputable firms, are almost impossible to argue against.
10. Once the settlement sum has been finalised you can now concentrate on your replacement build. Assuming you can build a new house on the same property you should be free to go back to your designer and start the design and build process of the style and floor plan you want (check with your policy).
11. And away you go.
You need to take these steps (or similar) because your insurer is not just going to hand over the cash – or if they are it will be less than the cost of the rebuild value. They are going to want to negotiate a settlement most favorably to them if history is anything to go by. You need to be armed with facts and figures from an independent and as I say, always get good legal advice.
This same process can be used for any natural disaster where your house is destroyed including fire, flooding and landslip etc.
PS: It annoys me when I hear on the news that insurance companies are screaming about the cost of the Canterbury disaster claiming they are going to have to put their premiums up to cover their losses. Traditionally the insurance business has been very lucrative so they should just sell off some of their business assets and stop using this as an excuse to put their prices up.