New Zealand homeowners are miscalculating the cost of rebuilding their properties, leading to the risk of underinsurance, IAG has warned.

Home and Contents Portfolio Manager Brendan McGillicuddy says property owners can overlook rising building material costs, demolition expenses if the home can’t be repaired and regulations and compliance changes introduced after the property was constructed.

“The cost to rebuild is an important thing to understand. It’s not the same as market value or rateable value. We really want people to know these concepts are not the same,” he said during Money Week.

“We would recommend homeowners take the time to consider their sum insured, not just when they take out a policy or at renewal time, but whenever there are significant changes made to their home.”

Data from New Zealand valuation services firm Quotable Value (QV) shows the cost of construction in the country’s main centres has increased more than 30% over the past 10 years.

Money Week is an initiative of the Commission for Financial Capability and aims to increase education and awareness of financial matters. Last Tuesday was Insurance Day in New Zealand.