AMI Policy Renewals by John

Posted 28 Jan 2014 by John
Private InsuranceOvercap
This is might be of some help.

At renewal all our AMI policies change from being total replacement based on m2 to being capped at a sum insured.

Insurance companies are applying a $2,000 per square meter as a default sum insured on renewal – so in my case my home will be insured for $542,000 unless I request otherwise.

BUT it is very important to be aware of the following.

The new sum insured will have any outstanding repairs not completed at renewal deducted from the sum insured that AMI is actually covering you for.

So to put it simply – if your house was insured for $500k, AMI will deduct from that figure the cost of outstanding repairs (yet to be done) and will cover you for the balance.

I called AMI and asked them how much would they be deducting (as outstanding repairs) in my case and they couldn’t tell me. They say that figure would come from Southern Response.

As a sweetener (and to fudge the massive premium hike AMI are charging) they have told me that any Client that is over cap and hasn’t had repairs done is automatically getting a 50% reduction in the AMI (Company)premium. The figure on your renewal is most likely with the 50% discount already applied – but it doesn’t tell you that anywhere to hide the massive increase.

In my case my AMI portion of the premium is going from $353.56 up to $466.56 after the application of the 50% reduction – it would have been $933.12 – an increase of 163%

The Earthquake cover and Fire Service Levy are set by the Govt as is the GST and they are all charged on top of that figure.

The issue I have with this is that AMI (I have had in depth discussions with them today) are charging a premium on a figure that they are not actually covering you for, and that they cannot tell you exactly how much they are covering you for. They said I could accept it as it is, and get the 50% reduction in the company premium or I could reduce my sum insured to reflect the cost of outstanding repairs, they would remove the clause reducing the sum insured by the outstanding repairs, but I would lose the 50% discount.

Everyone will have different scenarios on which is the best option for them to take depending on the new sum insured for their house and the cost of repairs.

In my case the latest Southern Responses DRA offer is approx. $250k whereas I have had a private builders quote come in at $450k – when I asked AMI which figure would they deduct from my new sum insured they said it would most likely be the Southern Response figure, but since I have now had 3 different figures from Southern Response who knows exactly what cover I might now have with AMI going forward.

As an extra bit of advice it is important to allow a margin over and above what any online calculator might give you – an extra $100k of cover won’t cost a lot more but will allow for inflation increases above the norm, and will put some fat into the policy in case it takes years to have repairs / rebuilds done in the future. You will only be paid the real cost to do the job but unlike in the old days where there was no cap to the cost now there will be, as your nominated sum insured will be the max you will have available.

Finally – don’t forget that the sum insured under an AMI policy is GST inclusive – so you should add on as an absolute minimum 15% to your figures.

That’s enough for now – let me know if this is helpful.