How home building insurance is priced

RACV Home Insurers BEWARE.
When getting a quote for home insurance, how is the price assessed?
APIA for example sets an amount to rebuild/replace your house. RACV on the other hand, asks you how much you paid for the house. Innocent home buyers are then charged the price of house and land for the ‘sum insured’. I know one person who has received compensation for 12 years of overcharging, but only after many letters and phone calls. Her experience made me check my policy with them and sure enough it was the sale price that became the sum insured!


Welcome @Coll to the Community.

I just did a quote with RACV and it doesn’t ask for sale price. It calculates an estimated replacement cost based on the properties of the building.
That would form the basis of sum insured, and you would be free to increase or decrease that as you see fit.
Although as with most insurance, overinsuring something will not necessarily lead to a payout of that amount.


This is a complicated calculation. Based on what you have written, this could easily lead to underinsurance and that is quite possibly worse than overinsurance.

That’s what the insurer for my house does (automatic on web site).

For example, most people would want to add the value of their contents. :wink:

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For replacement cost, don’t forget to add in the cost of demolishing & rebuilding boundary and other fences, and difficulty of access if not on flat ground.

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And any building approvals/planning approvals which may also be required.


There is often a further cost to meet upgraded current design approvals for the site. EG Fire rating, flood heights or even simply the finished slab height above street level. Or those off the sewage grid the old septic may not cut it and a modern $20k replacement needed. Depending on council and state/territory the extent of compliance required can vary. An insurers estimate should include an adequate allowance. Although it is a moving target!

A replacement house may be a very different one to that previously on the site.