The rising cost of building materials may leave home owners in the lurch as the risk of under-insurance throughout New Zealand grows.
Building a house frame Photo: RNZ
Most residential home insurers use a fixed sum policy, meaning anything over and above that amount will not be paid out if a home needs repairs or a total rebuild.
So, with construction costs continuing to rise the amount homes are covered for may not be enough.
Christchurch homeowner Rachel had not thought about her house insurance for years, until she and her partner decided to build an investment property just down the road.
The building contract had clauses in it for a potential bump in material costs of 30 percent but there was no acknowledgement of that from her insurance agent.
"We were really surprised that it didn't match what we were spending or what we might have to spend on materials, because if the building materials go up by 30 percent ... it won't match up with what we've insured for.
"We're carrying quite a lot of risk at the moment so if something happens ... the insurance that we have for it now won't cover if the prices of materials have gone up even by like 5 percent."
Data released from the building products database firm EBOSS found the cost of building materials had risen by more than a third over the past 12 months.
Managing director Matthew Duder said they were expected to climb at least a further 10 percent over the next six months.
"And to be honest it doesn't really matter what type of material [it] is, the increases are fairly constant across the different categories."
All sorts of building materials are putting pressure on construction costs. Photo: 123RF
Since the Canterbury earthquakes most insurers have moved to capped sum policies for home rebuilds - ridding themselves of the risk to have to rebuild a client's home whatever the cost.
A 2015 Treasury report estimated since that change, the total under-insurance of New Zealand homes was in the vicinity of $184 billion.
Insurance Council chief executive Tim Grafton said homeowners should ensure their cover was appropriate.
"We're in a very high inflationary environment and particularly with respect to building costs and building supplies, some of those are in double-digit inflation territory so that would have a dramatic effect on the cost of rebuilding your house if the very worst happened."
He said some insurers have a 10 percent buffer in place for sum-insured policies, which still might not be enough in the current market.
Tower chief executive Blair Turnbull said his customer base was not substantially under-insured but admits the environment has changed rapidly.
He said while it was the policy-holder's decision as to how much they insure for, insurance companies should take responsibility.
"We certainly feel we have a responsibility to make sure that the cover that we have in place for our customers matches the asset. That's why we provide tools that are accumulating a lot of data or grabbing data in real time to best reflect the value of that asset."