For most people, their house is their most valuable asset so it's important to make sure it's properly insured.
For most people, their house is their most valuable asset. As with all types of insurance, you have choices depending on what types of insurance best suit your needs, and how much you are looking to pay for that insurance.
This section notes some of the different kinds of house insurance available.
You can insure your house against sudden, unforeseen and accidental damage from all perils. Or you can insure it for certain defined perils like fire, theft, flood, storm or earthquake. You can also buy insurance that provides you with different standards of repair.
There are 3 main varieties of cover available:
- Fixed sum insured — the most common type of cover currently in the market. Fixed sum insurance is where you and your insurance company agree on the total sum your house is insured for. If your house is destroyed, your insurance company will pay to rebuild your house up to that dollar figure.
- Indemnity (present day value) — what the house was worth just before it was damaged. It is roughly equivalent to the depreciated replacement cost of the house (not including the land) taking into account its age and condition. Some older homes (such as those built before 1945) may only qualify for indemnity cover unless they have been modernised.
- Total replacement — a policy that means that if your house is destroyed, your insurer will rebuild or repair it up to the total number of square metres you insured it for and pay all the professional fees and demolition costs involved in the reconstruction process.
House insurance is often also known as home insurance.
Under this policy, the insured and the insurance company agree on the sum insured, and the company agrees to rebuild or repair the house up to that limit, including all the fees involved, if it is totally destroyed. It's important that you understand what your home's Sum Insured covers, what it doesn't, and what you may need to do when your home policy is due for renewal.
Always make sure your sum insured cover is up to date
- Your sum insured should not be based on the market or rateable value of your house.
- It's important your home's sum insured amount reflects the potential cost of rebuilding your home as accurately as possible. If your house is ever destroyed, your insurer will pay no more than the sum insured amount you'd previously agreed — even if the actual cost of rebuilding your home turns out to be more.
- You're responsible for determining your sum insured.
- If you set your sum insured amount too low and you need to repair or rebuild your house, you may have to rebuild to a lesser size or quality or pay for some of the work yourself.
- If you set your sum insured amount too high, you may be paying too much for your home insurance — if the cost of rebuilding your home turns out to be less than the sum insured, policies don't require insurers to pay more than the actual cost of rebuilding.
- You can use the sum insured calculator on your insurer’s website to calculate the replacement cost of your home. For more complex property you may wish to get a valuer or quantity surveyor to provide a replacement valuation for your home.
- You should review your sum insured regularly to ensure you have the right amount of cover.
Check the rest of your policy schedule regularly
- Your policy schedule will be sent to you every year as part of your policy's renewal. It contains the information your insurer has about your home.
- You should always check this information to make sure it's correct and up-to-date. For example, if your home includes extensive retaining walls, you should check if these are noted on your Policy Schedule.
- If you have made improvements to your home since you took out or renewed your policy, you should inform your insurer and decide whether you need to increase your home's sum insured to reflect the improvements.
- From time to time, your insurer may make adjustments to the excesses payable at claim time or introduce new excesses. It pays to check the information that comes with your policy renewal for information about these.
Retaining walls and recreational features
Retaining walls and recreational features (permanently fixed outdoor items built for the purposes of recreation, such as swimming pools, spa pools and tennis courts) may have limited cover under your policy. This is called a policy sub-limit or a cover limit.
- If the likely cost of rebuilding these is more than the cover provided automatically by your policy, you may wish to specify these on your policy and purchase additional cover. Your home's Sum Insured will increase accordingly, as will the premium you pay for your house cover.
- Some policies no longer provide any level of cover for these features. In this case, you'll need to decide whether to purchase additional cover so your recreational features and/or retaining walls are protected.
Other special features
Special features are not automatically covered under most house policies. If you require cover for special features, you'll need to talk to your insurance provider and this will likely affect the premium payable for your home cover.
Special features excluded from your standard house policy may include
- private landings or airstrips
- permanent fords or dams
- bridges and culverts
- cable cars
- private utility plants (such as windmills, water mills or diesel generators).
Fixed floor coverings
Fixed floor coverings, such as fitted carpets, are generally included in home policies (rather than contents policies), although some policies still include carpets under contents. Check with your insurer whether this is the case for your policy. If it is, include an amount for them in your Sum Insured. If you have home and contents policies with different insurers you could end up with no cover or duplicated cover for your carpets. If this happens, ask your insurer about the Insurance Council’s carpets agreement.
If your house is destroyed, the insurance company will rebuild or repair it up to the number of square metres insured and pay all the fees involved in the process (including architect's fees, labour and site clearance fees).
You will be covered for what your house was worth just before the loss. Your insurer will rebuild or repair your house up to that limit.
The premium you pay for your house insurance reflects
- your house's values
- the cost of the reinsurance that insurers are required by legislation to hold
- the administrative costs of maintaining your policy
- Earthquake Commission levy
- Fire Service levies (a government tax that only insured properties pay to fund the fire and emergency service — uninsured properties get this service free of charge)
Here's an example of what's included in a $1000 home insurance policy premium (as at November 2017):
|Insurance premium||$359 (36%)|
|Fire Service Levy||$106 (11%)|
|Earthquake Commission Levy||$207 (21%)|
In New Zealand you automatically have EQCover for your home and land if you have a current private insurance policy for your home that includes fire insurance (and most do). In the event of a natural disaster, your insurance provider will look after the EQC portion of a claim, assessing, managing and settling the claim for you.
EQCover provides cover of up to $150,000 plus GST for a house and the land immediately surrounding it in the event of a natural disaster.
You can find out more on the EQC website.
Contents insurance covers the contents of your home, including
- household possessions
If you don't own your house, you should make sure your contents insurance covers personal liability for damage to property you're living in.
Most contents policies have claims limits (sub-limits), especially for valuables, jewellery, money, documents and collections. Different policies have different restrictions and there may also be specific conditions to the cover.
There are 2 types of covers available:
- replacement cover — your insurance company will replace a lost or destroyed item with a new one, or repair the item so it is as new. There are some limits to this
- items over a certain age may not be replaced
- items over a certain age may not be replaced
- if cash is wanted, the insured may only get the indemnity value of the item (see below)
- there is an upper limit on what can be claimed either in whole or by category of contents — this will be specified in the insurance policy as the "sum insured".
If your parents or guardians have a comprehensive contents insurance policy, there is a good chance that all of your possessions will be covered. You should check with them to see whether they have insurance and what it covers. If they have no insurance, or if you have some particularly special or valuable possessions, having your own contents insurance is an option.
If you're flatting, talk to your insurance company and check whether they will cover you if you break your landlord's appliances or contents. For example, would they cover the cost of repairing or replacing your landlord's fridge if you break or damage it?
Remember that your contents cover will probably cover your possessions if one of your flatmates damages them but it won't necessarily cover their possessions if you cause damage to them — they need their own contents insurance for that.
If your parents have a comprehensive contents insurance policy, you may still be covered under it — even if you're in a hall in a different city. It's best to ask your parents to confirm with their insurers.
If your parents don't have contents insurance, you may want to think about getting your own. Many University Halls suggest it during your orientation, especially for important things like your laptop or phone.
If you are worried, you can talk to the student advisers or RAs at your hall or check with your university accommodation service.
Usually, your contents will still be insured if you take them to school, work or on holiday with you (unless you take them outside New Zealand). However, some insurers only cover your contents if they are in your home.
Check with your insurance company if you are worried.
You should advise your insurance if you have items in a storage unit or if you're planning to move some there. Often, you will need to take out special, short-term cover to protect any assets kept in a self-storage facility.
Check out our consumer guides for more information on
- accidental and gradual damage
- calculating your sum insured
- purchasing house insurance
- replacement and indemnity cover
- resultant damage.