Insurance value - PPOR & investment properties

Discussion in 'Accounting & Tax' started by qak, 6th Jan, 2019.

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  1. qak

    qak Well-Known Member

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    I'm just wondering how PC members arrive at building insurance values for their own house and investment properties?

    Do people get actual valuers to do this (on insured value of course)?
    Use estimators that some insurers link to?
    Guess?

    Our own policies started at $X and have been indexed since then, but I just wanted to check they were still in the ballpark for what would be likely - including demolition & removal costs in the worst case scenarios? I always get a bit concerned that external landscaping costs & pool may not be included.
     
  2. Islay

    Islay Well-Known Member

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    Our PPOR after a major reno 10 years ago we had a valuation for insurance done. We have increased with inflation since then. IP's are more standard builds and we have used standard insurance calculators.
     
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  3. qak

    qak Well-Known Member

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    And another question - I just looked at the BMT building cost calculator and it said excludes GST (and obv not demolition, removal as well ...) ... do I need to insure for GST value?
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Will you pay gst to the builder?
     
  5. qak

    qak Well-Known Member

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    I know the builder has to charge GST, but - if it comes to a loss situation, will I be paying the builder, or does the insurer - as presumably the insurer could claim back the GST?
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    My previous claims have been for commercial properties, insurer doesn't reimburse the gst component as the owner was registered for gst and had to claim/wear the gst component.
     
  7. Skinman

    Skinman Well-Known Member

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    It’s something I’ve always struggled with to be honest. I think the calculators the insurance companies use tend to massively over insure you. I say this based on the fact I built a place for $280k and they wanted to insure me for $500k and I know even in a total loss demolition costs etc aren’t $320k!!!

    I also notice that the insured amount appears to increase by around 8% per annum which is a lot more than CPI which I constantly question.

    Some insurers have a minimum amount they will insure you for and I have been asking to insure at this value for a while now.

    Would be keen to hear what other think on this topic.
     
  8. KateSydney

    KateSydney Well-Known Member

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    I work for a major general insurance company. After the 2003 Canberra bushfires there was an ASIC study of underinsurance. The industry came under fire (pun not intended) for permitting underinsurance. As an industry we now have a big commitment to sort it out. With my company the home insurance estimate system links to Cordells. The system, as you say, is programmed not to permit underinsurance. Usually I find customers have no idea about rebuild costs. But examples as extreme as Skinman's are rare in my experience (15 years of directly helping customers with their general insurance). Where the difference is smaller than his was, it usually comes down to things like customer not aware of the economies of scale where a developer or builder is doing a lot of places at once, as opposed to doing one as an infill after a fire, soil tests needing to be done again, building codes changed and a thousand other things. All that being said, there's no point in overinsuring. It's a fine line to walk for insurance companies, for sure.
     
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  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Most insurance companies offer a online calculator tool to assist to determine replacement cost. Its then wise to compare the calculator value to the actual cost of a equivalent build if one is known (eg a project display village). Ensure you allow for other costs such as fencing, landscape (check what is covered !), site clearing and demo (depends on policy wording) and all things that comprise a completed dwelling (antenna, screens, blinds, floor coverings etc) as required etc. And new driveway etc. A minor fire can easily become a write off from smoke and water damage.

    One of the most under-insured items is contents. Think of losing everything and the cost to shop for complete wardrobes, linen, bedding, kitchen stuff, food, furnishings and nick nacks etc Mobiles, laptops, electronics and albums, CDs, pictures.........

    For a insured (ie PPOR or IP) who is NOT registered for GST the insurer will pay the GST inclusive cost. But a commercial property owner may be insured for the GST exclusive cost if they are registered or required to be. The insured value should also reflect this issue.
     

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