What is sum insured and how does it work?
You’ve likely heard the term sum insured when you’ve taken out house or contents insurance, but do you know what it actually means?
What is sum insured?
Sum insured is typically used in both contents and home insurance. With your contents insurance, sum insured refers to the total amount your contents are covered for. When it comes to your house insurance, the sum insured is an amount agreed when you first take out your cover - this is the amount that your insurance provider will pay to rebuild your home should the worst happen.
Contrary to popular belief, sum insured does not refer to how much you paid for your property, or what its market value is. That’s why it’s important to know how much your sum insured should be to keep you covered.
How much should my sum insured be?
When you take out house or contents cover, you’ll need to calculate your sum insured. There are a few ways you can do this, including working with professionals such as builders or quantity surveyors.
However, if you’re low on time, you can use an online calculator like the Cordell Sum Sure Calculator that can estimate the typical building costs for a standard residential property. When calculating the sum insured of your home, you’ll need to consider the floor area of your house, the construction and quality of materials used, labour costs, and any permanent fixtures.
Because factors like the cost of materials can change regularly, it’s essential to review your sum insured on your house and contents regularly.
For example:
Geoff and Angela purchased a house at the start of the year, using the Cordell Sum Sure Calculator to find their new house had an existing rebuild value of $410,000. They renovated their kitchen and added a permanent pizza oven in the backyard. These additions increased the amount required to rebuild their house, so when they renewed their policy, they made sure to update their sum insured figure to $450,000.
How can I make sure I’ve got it right?
It’s best to work with the experts to make sure that everything you need is covered. A financial adviser can explain how the cover works, help you work out your sum insured, and answer any questions you might have about your house and contents policy. If you want to get your house insurance sorted, or you want to review your existing sum insured, come and have a chat with us - we’ll get you covered!