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Body Corporate Insurance Glossary

Sum Insured

The sum insured is the maximum amount an insurer will pay out for a covered claim. For body corporate building insurance in New Zealand, it is set to the estimated full replacement (reinstatement) cost of the building, including demolition, professional fees, and inflation provisions.

Setting the sum insured correctly is one of the most important decisions a body corporate makes. If it is set below the actual replacement cost, the insurer may apply average — paying out only proportionally — which can leave owners with a significant shortfall after a major loss.

NZ best practice is to commission a registered valuer for a building reinstatement valuation every 2–3 years, and to update sum insured annually for indexation between valuations.

See also

Related terms

Reinstatement Value

Reinstatement value is the cost to rebuild a building to its current standard, including demolition, debris removal, professional fees, and compliance with current building codes. It is the basis on which most body corporate building insurance sums are calculated.

Indemnity Value

Indemnity value is the depreciated value of property — what it is worth today, accounting for age and wear. It contrasts with reinstatement value, which is the full cost to rebuild. Body corporate building cover is almost always written on a reinstatement basis, not indemnity.

Excess

The excess is the amount the body corporate must pay before the insurer contributes to a claim. Body corporate policies typically have multiple excesses — a standard excess for general claims, plus separate (often much larger) excesses for natural disaster, water damage, and weathertightness claims.

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