Buyers warned about quake-damaged homes
Christchurch househunters need to be "very careful" when buying an earthquake-damaged property or risk being caught short on insurance cover, a real estate industry leader says.
Two insurers last week clarified that full replacement insurance ended when a homeowner sold a property, leaving the new owner covered only for its indemnity value - what it was worth at the time of loss.
IAG Canterbury recovery executive manager Dean MacGregor said yesterday that the company could not "transfer the policy rights themselves to a new owner".
Real Estate Institute Canterbury spokesman Tony McPherson was worried people may buy properties thinking they were repairable, only for new damage to be found that made them writeoffs.
"That's the area we're quite concerned about," he said. "[We're] telling people to be very careful and do their due diligence when they are purchasing a property with moderate damage because if there is a change and it is written off, they will only get the indemnity value, not replacement value."
The problem was "something that first surfaced two or three weeks ago", he said.
The institute and the Law Society had asked for explanations from insurers, and the institute was writing to its members to clarify the issue, McPherson said.
MacGregor said there had been "no change" in IAG's approach when a house was sold. People who bought damaged houses took on the rights to an existing insurance claim, not the policy.
"The policy is not something that can be bought or sold," he said. "The policy is something that is a contract between the property owner and the insurer."
The clarification appeared to have caught the real estate industry on the hop, he said.
"It's perhaps just come about as a more topical issue as time's gone by and people are starting to buy and sell damaged homes at a greater rate," he said.
Vero spokeswoman Vasantha Naidoo said the company had always had a policy that new owners of quake-damaged homes would only be covered up to indemnity value.
"We would advise our customers who are planning to sell to engage their [insurance] brokers and get legal advice," she said.
Lumley Insurance earthquake response manager John Grant said homeowners who chose to cash-settle on a total-loss property would get indemnity value, but full replacement insurance would carry over in a sale.
"When we assign a right under a policy to the new owner of the property . . . they step into the shoes of the original insured person and are entitled to the same benefits," he said.
"There's nothing in our policy that limits the way we would handle that claim."