House insurance protects a homeowner from expensive repair costs and worst still, a complete rebuild, if the property was damaged or completely destroyed in a disaster or from an unexpected accident.
Natural disasters are common in NZ and can cover events such as floods, earthquakes and tornados. Accidents on the other hand can include fire damage from an overloaded power point, a car crashing into your property, and other unexpected events like kids putting a hole in the wall and or a falling ladder breaking a glass door. Regardless, as a homeowner you will be thankful that you have house insurance that will pay for the fix.
Take a look at the key things you need to know about House insurance in New Zealand below.
We recommend that all homeowners have House insurance.
Your property is likely to be the most expensive asset you own and also practically it provides a place for you and your family to live in.
If something bad happens to your property (yes it does happen - houses do burn down, cars do crash into properties, and other disasters such as floods and even tornados do occur), you will want to have a place to live in and the money to repair or rebuild your home.
Repairing or rebuilding your house could cost anywhere from hundreds of dollars to hundreds of thousands of dollars. In 2021 alone, insurance claims due to weather related events hit a record high of more than $300M in the year.
If you have a mortgage, you will be required by your bank to get your property insured. This is to protect the house in the event it is damaged and requires a lot of work and huge costs to repair and/or rebuild it. Having house insurance avoids the situation where you, the homeowner, have a loan on the property but you cannot live in it due to damages or a complete and cannot afford to pay to have it repaired or rebuilt.
If you are purchasing your first home it’s important to think about this now and factor in the cost of insurance as part of your decision.
Check with the existing homeowners about their insurance situation to see if there are any issues with being able to get insurance. If the property is on a steep slope, or if it is in an area that is prone to flood or fire risk, insurance could be slightly more tricky to put in place. You can also reach out to an insurance company or an insurance adviser (connect with an expert on Quashed) if you need help with a quote or more information.
Read on to find out more about the house insurance and what you need to look out for.
The amount you insure your house for should be enough to help you get your property back to the condition it was in prior to any damage.
The amount should include the cost of demolition (of your existing damaged property if it cannot be fixed), getting the necessary consents and paying for professional fees (e.g. architect) if it were completely destroyed.
Take for example, an unexpected fire burns down your house and you need to have it rebuilt. The amount you insure your house for should be enough to pay for the entire rebuild cost so that you do not have to pay out of your own pocket.
Your house insured amount should be reviewed at least once a year or every couple of years. Check that the insured amount will cover the rapidly increasing cost to rebuild your property.
A news article in 2021 reported that a homeowner whose house was badly damaged due from a faulty dryer that caught fire was paid out the insured amount of $400,000, but the quotes to get it fixed was going to cost at least $520,000. This meant that the homeowner had to pay for the $120,000 difference out of their own pocket. If the homeowner had checked and kept the sum insured up to date this could have been avoided.
There are a couple of ways you can find out how much it will cost to rebuild your house for and therefore how much you should insure it for:
DIY online. There are a number of online tools that can estimate how much you should consider insuring your house for. Here is one provided free-of-charge by Core Logic which is used by banks. Simply enter your address and confirm a few other bits of information about your property and it will provide an estimate. This is quick and easy, but not necessarily the most accurate.
Engage a quantity surveyor or valuer. Get the experts to inspect your house and provide a report on the cost to rebuild your property. To find a qualified quantity surveyor and read more about how they can help, check out the NZ Institute of Quantity Surveyors. Cost varies from $500-$1,000 for the valuer or quantity surveyor to visit your property and to provide a report. If you have a larger than average sized property or a property that is built with unique features and materials, or it is on a steep slope, this could be the better option for you.
Avoid insuring your house based on what you paid for it. This is because the amount you paid for the property will usually be much higher as it includes the cost of the land and it also depends on when you paid for the property. If it has been a few years since you bought your house, prices have since gone up tremendously. The amount you insure your house for should exclude the cost of your land.
Most insurers in New Zealand now offer the Sum Insured option for house insurance. This means that they will only pay up to the amount you have insured your house for in the event of a claim.
For example, if you selected your sum insured amount to be $400,000 and your house was completely destroyed in a disaster or accident, that is the amount you will receive. The cost of your repair or rebuild could cost $500,000 but unfortunately you will only receive the sum insured amount from your insurer - $400,000. The difference will have to be paid for by the homeowner. This is why getting the sum insured amount right is very important.
The Full Replacement option is where the insurer will cover and pay for the reasonable cost to repair or rebuild your house to the same standard prior to the damage incurred. In the past, Full Replacement covers were commonly offered by insurers. However, this became too expensive and difficult for insurers to calculate their loss exposure after the devastating large-scale claims in the aftermath of events such as the Christchurch earthquake. The only insurer on the market that appears to still be offering this cover is Medical Assurance Society (MAS).
Some insurers such as Tower and AA are offering a hybrid model between Sum Insured and Full Replacement. For certain events like natural disasters, they do not offer a Full Replacement cover. However, for other events, they do. This means that you will still have to select a sum insured amount and depending on the claim event, they will either pay out the sum insured amount or pay for the reasonable cost to rebuild or repair your house to the same standard it was in prior to the damage.
The cost of house insurance comes down to a few key factors:
Amount you want to insure the house for
Type and location of the house
The homeowner including claim history
Level of cover you are after
Excess level selected
Based on data from Quashed’s Market Scan comparison tool, the average cost of house insurance in NZ is $1,618 a year in 2021. When looking at the cost of insurance in specific cities - Auckland is approximately $1,200, Wellington is $2,000 and Christchurch $1,600.
The cost of house insurance can vary widely between insurance companies. This is due to a number of factors including the insurer not wanting to take on the risk of insuring a property in certain areas. In this case, the premium or price of the policy will reflect this and be very expensive. In some cases, the price difference can be $4,000+ between the highest and the lowest quoted price for the same house.
We recommend always checking a few insurance options to see the premium difference but also the difference in the cover it offers.
Market Scan is the best online insurance comparison tool that helps you easily and quickly compare options for house insurance. It saves you the hassle of visiting multiple different insurance websites to enter the same information and to evaluate the difference between the policies. On average, Market Scan finds more than $500+ in price difference and savings for our customers on Quashed when it comes to house insurance.
Having the best house insurance comes down to what the homeowner is looking for.
For some of us, it might be the cheapest house insurance we can find. For others, it is the policy with the most comprehensive benefits and limits. For others still, it is the best experience when it comes to engaging with the insurer especially when making a claim.
If you are after the cheapest house insurance, read the next paragraph to learn more about the cheapest house insurance in NZ and how you can purchase this. When it comes to the most comprehensive house insurance, let’s take a look at some of the additional benefits and limits across different insurance policies in the NZ market.
Inflation/Demand surge is one additional benefit that not all insurance companies provide but can make a difference when the cost to repair or rebuild your house is inflated due to a widespread event such as a natural disaster the cost of build and repair rises quickly and your sum insured amount may not be sufficient to cover the price increases. Tower’s Premium policy provides for 15% of sum insured amount whereas State provides for up to 10% of sum insured amount. AA does not have this additional benefit.
Renovation/Alteration cover is one additional benefit that are offered by some insurers. AA and Tower insurance offers this (AA up to $75,00 and Tower up to $50,000 on their Premium policy). Without this, a homeowner will need to take out a separate Contract Works policy to remain covered even when doing minor renovations on their property. AMI, ASB and BNZ house insurance policies do not offer this within their cover.
Comparing the top tier house insurance from providers, other benefits include:
Landscaping cover that some insurers provide within their house policy. Tower and State insurance provides this, but AA and AMI does not. Tower covers up to $5,000 and State covers up to $2,500.
Stress benefit cover is provided as a lump sum by Tower and State whereas AA and AMI does not provide this. Tower provides $2,000 as a lump sum and State also a lump sum provides $1,000.
To note, if you are away for an extended time, you may either not be covered or you will have to pay more excess on your house insurance if you make a claim.
ANZ does not provide cover on your property if you are away from it for more than 60 days. Get in touch with them before you head away to check how you can be covered. AMI and State both limit their covers to only natural disaster, lightning, fire and explosion if you are away for more than 60 days. AA and Tower both increase the excess by $1,000 in the event you are away for more than 60 days and make a claim with Tower also taking away some additional benefits in this time.
Finding the cheapest house insurance comes down to comparing options on the market. The more you compare, the better your chances of finding a cheaper deal.
On average, we find that there is a $500+ price difference on house insurance when comparing for our customers using our Market Scan tool. The largest difference we have seen is more than $4,000+ for the same property.
You might be wondering, how can the price difference be so much?
It comes down to a few factors including whether an insurer wants to offer insurance for your property based on the location, type of property and the homeowner. At different points in time, insurers may choose to take on different levels of risk.
For example, an insurer may have a lot of houses insured in one location and this increases the concentration of their risk and if a disaster strikes in that location, they will suffer huge losses. Therefore they may choose not to take on more risk in that location unless it is at a higher premium.
Let's look at some price differences we found across regions:
In Wellington, the highest premium in our scan was $1,921 and the cheapest was $1,388 for a difference of $533 a year.
In Christchurch, the highest premium to be $3,665 versus the lowest of $2,531 for a difference of $1,134 a year.
In Auckland the lowest premium found by Market Scan was $866 and the highest being $1,154 for a difference of $288 a year.
You can see that by comparing different providers in the market, you cansave hundreds, and in some cases, thousands of dollars a year.
Find out how much you can save on your house insurance by using Market Scan. It’s free, easy and quick.
There are more than 10+ insurance companies you are able to purchase house insurance from in New Zealand. When it comes to comparing house insurance, you can compare based on prices, or premiums as it is known, or by comparing the benefits within the policies.
The best comparison will take into account both what the policy offers and the price/premium you pay. Read more above on the price differences that can be found when comparing house insurance. It can be a lot.
On the other hand, house insurance policies can offer not only different benefits but also different limits on the cover. For example, Tower offers up to $50,000 of cover on their Premium policy for renovations/alterations to your property but AMI does not.
A quick and easy way to compare house insurance is to use Market Scan. This is a free online tool that helps you to compare other options in the market against your existing policy, or help you find your house insurance for a new property you are purchasing. This saves you time from having to visit multiple insurance websites and answer the same questions multiple times to get a quote. You can easily see a table highlighting the key differences between the options too.
Read above "Cheap House insurance" for tips and how much you can expect to save by comparing.
Insurers can choose not to insure certain properties and usually it will be due to the location of the property e.g. prone to flood risk or earthquakes etc.
Houses in Wellington and Christchurch are locations where it is usually more challenging to get insurance cover and ones that do offer cover will see a much higher premium cost compared to a property in some other parts of the country i.e. Auckland. This is due to the higher risk of a claim being made.
Risk based pricing is a term that has been popping up where insurance companies have shared that it is this model that they are using. This means that assets in these areas are viewed as higher risk, and therefore the prices reflect this so that others outside of these riskier locations do not get penalised (i.e. share in the higher risk costs).
Properties that are joined (i.e. townhouses or apartments) that are part of body corporates will be dealt with differently. If you own a townhouse with multiple units that are joined, or live in an apartment, chances are you will be part of a body corporate and therefore insurance covers will be paid for by the body corporate as a whole. If you are thinking about purchasing one of these properties, check to see what the insurance situation is before committing as it could save you some trouble and hassle down the line.
As a homeowner, you have three ways to purchase house insurance:
Direct from an insurance company online. Use Market Scan to compare and find the best cover or the cheapest cover across multiple insurance companies. Once you’ve narrowed it down, simply purchase from the insurance company directly through their online website. This is a DIY option meaning you have to engage with the insurer directly and find the right option, select the right cover amount and handle the claims yourself.
Purchase house insurance from your bank. This option is usually out of convenience when a homeowner has a mortgage with the same bank. However, comparing different policies not only saves you money but can also find you much better insurance covers.
Using an insurance adviser (broker) to help you figure out and purchase the best house insurance for you. An insurance adviser will be able to provide advice on the cover to purchase and help you make comparisons. They will also be there to assist if you need to make a claim and help fight to get a claim paid where it may be unclear within the policy. There is an advantage here given they have more bargaining power with the insurer due to the group of customers they represent. There may be a fee some advisers/brokers charge of between $50 - $150 so do check.
Use Quashed to find an adviser if you would like some help. Simply sign up for free and click on Get Advice to connect over a call or video call.
House insurance protects the physical building of your home whereas contents insurance covers what is inside.
A simple way to think about it is that contents insurance covers the things that fall out if you can imagine tipping your house upside down.
Valuables and assets such as your white wares, furniture, beds, watches, jewellery, canoes and kayaks, TVs and your electronic goods such as laptops, mobile phones and tablets will fall under Contents insurance.
House insurance on the other hand protects your house, including swimming pools, retaining walls, and even your garden and landscaping.
Both policies go hand in hand and can help save you a lot of hassle and money if something bad like a fire, flood or earthquake were to happen. Thefts and accidental damages are also events where these insurance policies can help repair or replace your valuables without you having to pay out of pocket.
Check your sum insured amount is still enough to rebuild your property if it is destroyed
Use Market Scan to compare prices, benefits and limits of house insurance
If you are renovating your property, check that it’s covered within your house policy
If you are away from your house for more than 60 days, check you are still covered