A slip

Anyone with home and contents insurance is also covered for most unexpected events by either their insurer or the Earthquake Commission (EQC).

EQC cover insures your house against loss or damage up to a maximum of $100,000, personal effects up to a maximum of $20,000, and either the value of land or its repair cost (whichever is lower). You can arrange to get greater or less cover through your insurer.

You're covered against earthquake, natural landslip, volcanic eruption, hydrothermal activity, tsunamis, and fires resulting from these natural disasters. Your residential land is also covered by EQC against storm and flood damage.

EQC exclusions

One area where people are often exposed is if their property subsides. The EQC covers land moving sideways and downwards. However, erosion by the normal action of wind, the sea or a body of water is excluded.

Other EQC exclusions include jewellery, burglary or vandalism following an earthquake, and the cost of staying somewhere else while your home is rebuilt. Check whether your insurance policy covers some of these exclusions.

Tip: Check your policy to make sure you have adequate replacement cover from your insurer for the value of your house and contents if they are worth more than EQC's maximum limits.

Non-EQC-covered property
Fences, driveways, paths and swimming pools aren’t covered by EQC and most insurers in our survey now apply a $5000 standard excess if these items are damaged in a natural disaster.  AA Insurance is an exception; it only charges its standard excess of $300.

One of our members had her driveway damaged in the September 2010 Christchurch earthquake. The driveway still wasn’t fixed when the February 2011 earthquake happened. While some of the same area of the driveway was damaged further by the new earthquake, there was also new damage to other parts of it (and also to the house).

Our member’s Tower policy had an excess of $500 for driveways. Tower – like most insurers – applies an excess for each insurance “event”. Because these earthquakes were counted as separate events, she had two excesses applied against her policy.

The companies we surveyed said that usually you wouldn’t have to pay a second excess if the area damaged by the second event was already damaged by the first event. But where the second event caused new damage, then that damage would probably attract a second excess.

Flooding and storms

One of the biggest misunderstandings between insurers and homeowners is over the word “flood”. Every year many thousands of Kiwis find water damage to their homes and properties, which they think is caused by a “flood” but is actually the result of slowly leaking water from outside or from water pipes.

A burst pipe might be classed as gradual damage if it’s simply worn out from continuous use. Sometimes the resulting damage will be covered – but don’t assume it is.

Even when it’s a real flood from a storm or burst pipes, you need to be wary. If you haven’t told your insurer about previous floods you may not be covered. And don’t increase your cover when the floodwaters lap into your home, as one homeowner tried. The insurance company later tracked down regional-council aerial photographs that showed the house was already being flooded when the call was made.

Tips: Some policies contain limited cover for gradual damage caused by leaking internal water pipes but not for water that gradually enters the house from outside.

When buying a property, check the LIM report for natural hazards. If the LIM contains a Section 74 notice for a natural hazard, your insurer and the Earthquake Commission (EQC) may not cover you for damage from that particular cause.

For more information see also our separate Natural disaster insurance report.

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