The sum insured is the maximum amount the insurance company will pay to rebuild your investment in the event of a claim. These policies use the size, type, location, age of your home as the basis for the cover. The change to a “sum insured” policy means you will still be covered for the costs of rebuilding your rental home but there will be a maximum amount payable, called the “sum insured”. Your insurance company will only pay the costs up to the sum insured. If it costs more than the sum insured to rebuild your home, you will have to make up the shortfall. The sum, insured should be increased by 4% every year to keep up with present housing costs. You are better of over insuring than under insuring.
The sum insured is the maximum amount your insurance company will pay in the event that your home is totally destroyed or badly damaged. There is no guarantee that the sum insured will be sufficient to cover the costs of rebuilding your home. The sum insured is not the price you paid for your home, or the rates valuation. The price you paid also includes the value of land and reflects the market value of your home, rather than the replacement cost. The market value of your home will not equate with what it costs to rebuild it.
Typically, house insurance will cover the costs of rebuilding your home and other features or buildings that make up your home. Features can include driveways, fences and swimming pools.
Insurance policies usually also cover additional costs associated with the rebuild, such as professional fees, demolition costs and costs of meeting current building standards.
Your insurance policy will give details of what will and will not be included in your sum insured. It is important to read your policy carefully to understand what it covers.
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