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From issue: Spring 2004

Cover Story

By Paul Titus

Do heritage buildings cost more to insure?

Image: Focus New Zealand Photo Library

Insurance for heritage
buildings is an issue that members of the public
sometimes toss into the laps of New Zealand Historic Places Trust staff. They are concerned that a property registered as an historic place will attract higher insurance premiums.

But this is not the case, according to insurance
industry representatives. The cost of insurance depends more upon the size, use and condition of a building than its heritage value. Age may play
a part in how insurance companies evaluate its
condition, but the owner of a well-maintained building with up-to-date electrical wiring should be able to acquire full insurance coverage.

New Zealand Insurance Council insurance manager John Lucas contrasts the situation here to that in Britain.There, registered heritage buildings that are damaged may have to be reinstated in detail with materials and construction techniques that are as close as possible to the original.The cost of this has led the insurance industry to develop
special policies with premiums that are significantly higher than average.

Senior policy adviser with the Trust Aidan Challis says owners face no legal obligation under the Historic Places Act to return a damaged heritage building to its original state. Should a registered building be substantially altered or
damaged, the Trust would offer advice related to the circumstances, and it would also review the building’s registration.

“The heritage value of a building is not limited to its fabric,” says Challis. “There can be other values of an intangible nature, to do with the cultural or spiritual values it holds for the community. This means, even if it is damaged or destroyed, some of its heritage value may remain.

“If a registered building was damaged, we would encourage the owners to look after the parts that remain and avoid further demolition. When there is a need to repair a building, those changes should be complementary and compatible with the original and not detract from its historic value.”

Insurance policies reflect this legal state of affairs.The Insurance Council’s Lucas says a policy that covers a building for its replacement value would provide a building of the same square metres made with current methods and materials. “In case of partial loss,” says Lucas,“repairs would be done in a modern way if materials comparable to the original were not readily available.”

Rather than insure a building for its replacement value, property owners can also insure for its indemnity value or for a nominated value.

Indemnity value takes account of the depreciation of a building and arrives at a sum that reflects its market value. In the case of an historic building, this would be less than its replacement value.

A nominated value is that placed on a building by a registered valuer. In most cases, it would represent the replacement value, but it could represent a higher amount if, for example, an owner wanted to have a guarantee that he or she could fully restore a building with historically accurate material.

An informal survey by Heritage New Zealand of several insurance companies revealed different approaches to insuring older buildings, whether or not they are registered.

One company said it sent its own inspector to do an external check of any residential property more than 60 years old. If the inspector had doubts about the state of the building, the company might ask the owner to pay for an independent check and provide the results.

Two other companies said they did not use inspectors but, if a house was more than 70 years old, they required the owner to guarantee it had had improvements in the past 30 years in several key features, including electric wiring, roofing,
plumbing, piling and lining.

Protection against earthquake damage may be an additional cost that owners of historic buildings face. Brian Barker, of insurance brokers Crombie Lockwood, says pre-1935 buildings draw higher premiums, although these can vary around the country. Earthquake insurance in areas that are
known risks, such as Wellington, Napier, Nelson and the South Island’s West Coast, are higher than less shaky centres, such as Invercargill, Dunedin and Auckland.

One way for owners of heritage buildings to reduce insurance costs is to invest in additional fire protection. Plumbers can install a home sprinkler system developed by the Fire Service and the Building Research Association of New Zealand.

Connected to the ordinary domestic water supply, the system is heat-activated and will control a fire without flooding. Installation, even in an existing house, is not complicated, and the cost can be as little as $1000. For more information on home sprinkler systems, call your local Master Plumbers’ Association or call the national office at 0800 502 102.

Paul Titus is the principal in Titus Writes , a network of freelance writers, photographers and graphic artists.

A joint initiative between the New Zealand Historic Places Trust and the New Zealand Fire Service, these booklets contain practical fire safety advice for owners of heritage buildings and marae. Download a copy by clicking the covers (pdf file).

If you would like a personal copy of either booklet, please call NZ Fire Service tel (04) 496 3600 or the Historic Places Trust tel (04) 472 4341.