Insurance changes could leave unaware owners out of pocket.

How much would your house cost to build? If you don't know and don't want to rely on your CV or an insurer's online calculator, you may be facing a $500 bill from a valuer when a major change to the way insurance policies work kicks in.

From about now, all insurers will change their policies from "total replacement value", where the insurer stumps up whatever is required to rebuild a home, to "agreed value" policies, where a set payout is determined when the policy is taken out.

New AA Insurance customers are already on the new-style of policy and other companies will start to switch renewing customers from the middle of the year.

It gives insurance companies more certainty about what they will have to pay out after a natural disaster like Christchurch. Such policies were common 20 years ago but consumer pressure forced change.


"Insurers [have been] told to step in line with other countries because, with Canterbury, they will have no idea of the total cost of the rebuild until it is finished and that is because of the total replacement policies," said Insurance Council chief executive Tim Grafton.

Consumer New Zealand has warned that property owners will need to be careful about what value their policies are fixed at, as it almost always costs more to replace a house than what it is worth.

Payouts will need to include the cost of clearing a site.

AA Insurance spokesperson Suzanne Woolton said there would be little change to premiums. Online calculators, which asked for types of fittings, style of house, size and upgraded features, gave an accurate indication on the sum insured, she said. The calculators took into account building and associated rebuild costs.

Grafton said homeowners would be encouraged to seek advice from professionals on the value of their homes. In some cases, premiums might increase but in others they could drop.

Broker James McGhie, of Apex General, said people should do their homework. "Your house is your biggest asset," McGhie said. "You don't want to insure it for $300,000 if it is going to take $400,000 to remove and rebuild if there was something like a fire."

Terry Naylor, of the Property Institute, expected people who owned more expensive houses to call in valuers. His organisation, which represents valuers, had talked to insurers about them absorbing the $500 cost of valuations but was told that was not possible.

He valued one Christchurch property where the owner then did an online calculation that came out a couple of hundred thousand dollars higher. The insurance company told the client to use the calculator figure.

But he said online calculators accepted no liability.

Gavin Thomas, of Northland Valuers, said he expected a lift in inquiries. But that would eventually be cancelled out by a decline in the need for valuers to assess homes in the event of an insurance claim.

Certified Builders Association board chairman Dave Brown said many builders would be hesitant to help. "Initially there probably will be an increase in work, until builders realise how much liability they are putting themselves in for. We're discouraging our members from having anything to do with valuing homes."