If you’ve noticed your house insurance premiums going up, you’re definitely not alone. Many homeowners in New Zealand are facing higher costs, with average premiums increasing by 17.3% over the past year. So, what’s driving these rises, and is there anything you can do about it? Let’s outline the reasons and explore ways you might be able to keep those costs under control.
How much does house insurance cost in NZ?
Before we get into the “why,” let’s touch on the “how much.” House insurance costs in New Zealand can vary widely depending on factors like location and property specifics.
For example, Wellington homeowners pay an average premium of $4,467 annually, largely due to earthquake risks, while Aucklanders might pay closer to $2,104. Your premium will depend on things like your home’s age, construction type, and even the likelihood of natural disasters in your area.
But overall, costs have been trending upward, and here’s why.
Natural disasters and extreme weather events
New Zealand faces natural disasters like earthquakes, floods, and storms frequently. This situation is causing insurance costs to rise. The weather events are happening more and becoming worse. Insurance companies are increasing their prices to handle the higher risk of claims.
Severe weather in 2022 led to insurance claims of $351 million. This changed the amount that insurers need to pay. Some areas feel this change more strongly than others. For example, Wellington and Christchurch have higher risks from natural disasters.
If you live where earthquakes and earthquake risk are common, your house insurance might cost more. Insurance companies charge higher rates because they worry about big claims from disasters. Even if you never file a claim, living in these areas can still lead to higher costs for your house insurance covers. It's important to get the best estimate of rebuilding the cost of your home. This helps you avoid a total loss. You should also understand how the Earthquake Commission may impact your insurance plan.
Rising costs of construction and repairs
Another factor driving premiums up is the increased cost of building materials and labour. If you’ve noticed that home renovations or repairs are pricier than ever, you’re not alone. These rising costs mean that if something happens to your house, it’ll be more expensive for insurers to cover the repairs or rebuilding, which directly impacts your premium.
Why this matters: Insurers calculate your premium based on the “sum insured,” which is the estimated cost to rebuild your home. As rebuild costs go up, so does your premium.
Quick Tip: Using tools like the Cordell Sum Sure Calculator can help you keep your sum insured accurate. By reviewing it regularly, especially if you’ve done any renovations, you can avoid overpaying for coverage you don’t need.
Reinsurance costs: insurance for insurers
Reinsurance might look complicated, but it's simply insurance for insurance companies. It helps protect them from major events, like earthquakes, that can impact many homes.
As natural disasters occur more frequently worldwide, the higher costs for reinsurance have increased. This means that consumers also feel these costs.
If you live in a risky area, your insurance costs might go up. A part of what you pay could be linked to reinsurance costs. These costs are increasing worldwide. As a result, homeowners in New Zealand are facing changes in their insurance rates to cover these added expenses.
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The shift to risk-based pricing
You might wonder, “What is risk-based pricing?” This is a way for insurance companies to set prices based on the specific risks of each property.
Instead of giving every house in the same area the same rate, they adjust the price according to the risks of each home. This means your insurance premium could look very different from your neighbour’s, even if you both live on the same street.
If you have an older home with old wiring or live in a place with a lot of crime, your insurance costs might be higher. These things mean more risk. Even in the same neighbourhood, different homes, including an old house, can have different insurance costs. For instance, newer homes might be cheaper to insure than older homes.
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The impact of climate change
Climate change is a major reason that house insurance prices are rising. Extreme weather happens more frequently now. This raises the risk of insuring homes in some areas. Floods, strong storms, and
Example: If you own property near a river or in a coastal area, you may notice your premium increasing to account for the higher flood risk. This is one of the ways insurers are adapting to the changing climate landscape.
What can you do to manage rising house insurance premiums?
Now that we know why premiums are increasing, let's look at ways to manage your house insurance costs. You can save money and still keep your coverage.
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Review and adjust your cover regularly
Make sure the sum insured is equal to how much it will cost to rebuild your home today. If you estimate a high amount, you may end up paying more in premiums. If your estimate is too low, you might be underinsured. This means you would not have enough cover for what you need. You can use tools like the Cordell Sum Sure Calculator make this easy.
Example:
Consider this example with a house that has a sum insured of $1,000,000 but a more realistic valuation is $750,000.
Sum insured $ | Average house insurance costs $ | Savings $ |
$1,000,000 (overvalued) | $2,665 | |
$750,000 (actual value) | $2,039 | $626 |
Source: Quashed
In this case, if you set your sum insured to the true cost of rebuilding, you might save $626 every year. By checking and updating your sum insured often, you can ensure you have enough coverage without spending too much.
Want to understand more about house insurance and how to get the best coverage? Our House Insurance: A Homeowner’s Guide has everything you need to know, from choosing the right policy to budgeting tips
Consider increasing your excess
Increasing your insurance excess means you will pay more when you make a claim. This change can lower your yearly premium a lot. A higher excess can reduce costs by up to 20%. This choice is good for people who don't mind paying more at first to save money every year.
Example: adjusting your excess
Consider the same home in Auckland with a sum insured of $750,000. Here's how different excess amounts can affect your annual premium:
Excess | Yearly average premium $ | Savings Compared to $500 Excess |
$500 | $2,039 | - |
$1,000 | $1,877 | $162 |
$2,000 | $1,725 | $314 |
Source: Quashed
By raising your excess from $500 to $1,000, you will save $162 each year. If you raise it to $2,000, you will save $314 each year.
Before you change your excess, think about whether you are okay with paying more if you need to make a claim. It's important to balance what you save now with any future costs. This can help you make a better choice.
Shop around
Want to save on house insurance? A simple way is to compare different policies. This helps you find significant savings and good coverage. Websites like Quashed make this easy. You can view many insurers side by side. This way, you can quickly get the best deal.
Each insurance company offers different benefits and prices. A comparison tool like Quashed can help you find the best comprehensive policies that meet your needs by providing a summary of the various policy terms of coverage from several providers. However, it does not give insurance advice. It shows the full details of policy coverage, as explained in the specific policy wording document and the specific policy wording document.
Some policies may have lower premiums, but they could also come with conditions. This could mean a higher excess or limited coverage for some items. Other policies might have more features. These could include high liability cover, optional extras, or benefits like inflation cover. This helps keep up with rising building costs. It is not a good idea to ignore the fine print.
You can choose the features that matter most to you by exploring different options. This could be flexibility with extra amounts, more coverage for things like pools or decks, or perks that make you feel less stressed. A platform like Quashed makes this easy for you. It helps you understand your choices clearly. You can manage your coverage and costs without overspending through a transparent process.
Final thoughts
House insurance costs are rising, especially in difficult areas. It’s important to understand why and how to handle your policy. You can make these changes easier. By checking your coverage regularly, considering a higher excess, and exploring different policies, you can lower your house insurance costs. This way, you will have the protection you need. Have you checked your house insurance lately? It is important to make sure it is right for you.
FAQs
What factors determine the cost of house insurance?
House insurance premiums in New Zealand vary based on a few key factors:
Location: Homes in high-risk areas, like earthquake-prone Wellington or flood zones, often have higher premiums.
Property age and condition: Older homes may cost more to insure due to upkeep needs, while newer homes can be cheaper to cover.
Coverage and excess: The level of coverage and your chosen excess amount affect your premium. A higher excess can lower your monthly cost but increases out-of-pocket expenses if you claim.Understanding these factors helps you manage and potentially reduce your insurance costs.
How does house insurance work in NZ?
House insurance, or home insurance, is your safety net for when things go wrong. It covers you not only for accidental damage to your home but also protects you from potential legal issues, including legal liability, that might come up. Here’s how it works: you and your insurance provider agree on a “sum insured”—the maximum amount they’ll pay if your home is seriously damaged or destroyed. If disaster strikes, the insurance company will cover the costs to repair or rebuild your home up to that agreed amount, including any extra costs that come with the damage.
How much will my house insurance cost?
In 2024, the cost of insuring your home will be influenced by factors like inflation, real estate trends, and new regulations. On average, house insurance costs around $2,702 per year, or about $225 per month as of Q3 2024. Rising costs are a growing concern, with extreme weather events and other factors driving up premiums—so much so that 8% of homeowners are considering dropping their policies due to expense, according to Consumer NZ.
