REPLACEMENT FIRE INSURANCE DEFINED

Press, Volume CVIII, Issue 31773, 2 September 1968, Page 12

REPLACEMENT FIRE INSURANCE DEFINED

Replacement fire insurance is defined in a statement issued by the Insurance Council of New Zealand, which represents some 50 of the fire and accident insurers trading in New Zealand. The council says it has issued the statement to clear up an apparent misunderstanding on replacement insurance, as shown by letters to the editor recently. “An ordinary fire policy may be extended to provide an indemnity equivalent to the replacement value of the property,” says the statement “This type of policy may be granted for both brick and wood risks, but is always limited to insurances covering buildings, plant, machinery and the like. Merchandise or stock in trade cannot be so covered. “Where local, municipal or government authorities require the replacement of a fire-damaged or destroyed building in a manner which complies with special ordinances (such as replacement in reinforced concrete) cover may be granted for buildings which are already built of brick, stone or concrete. This type of policy is not available for dwellings, boardinghouses or residential flats unless the flats have three or more separate tenancies. “For both these types of policies it is necessary for the person insured to produce a new valuation every year,

and this must be completed by a registered architect or registered valuer. “Basic fire policies are issued for indemnity only—that is, the amount payable in the case of a total loss is the value of the building or property at the time of the fire but not more than the actual amount of cover stated in the policy. “The determination of the actual loss is really a questfon of fact and in the course of insurance business no difficulties are normally encountered in this respect. “The completion of a replacement or extra cost replacement policy means that the insured is protected beyond ‘indemnity’ value at the time of loss; hence the need for the annual valuation the cost of which is to be borne by the person seeking the insurance cover.

“It must be remembered, however, that every insurance company or organisation has its own underwriting principles and takes into account the circumstances which surround each particular application. Each office has its own right of selection, rejection or modification so for this reason not every company will take the same attitude towards a request for this type of fire insurance cover. However, in the highly competitive insurance market it is a simple matter to obtain expert guidance and advice on these matters,” the statement concludes.