Money
House and contents insurance
Introduction
Our annual house and contents insurance survey finds you the best deals in both price and cover.
We asked 15 insurance companies to provide quotes for 5 consumer profiles at various locations. We assessed their house and contents insurance policies and over 200 quotes to find the best deals.
We also look at cover for landlords and tenants, what to consider if you're renting out your home to Rugby World Cup fans, and ways to save on your premiums.
How insurance works
House insurance
This normally covers every domestic building on the property, including the house, pool, garage and fences.
Accidental damage is the most common type of cover. It insures you for everything not specifically excluded in the policy, such as wear and tear. This is the type we look at in this article.
Defined risk policies are less common. They cover you only for the risks specifically listed in the policy, such as fire or burglary. Many insurers offer only defined risk policies for holiday homes or rented accommodation.
With an accidental damage policy, you get 3 more options: an indemnity policy or a choice of replacement policies.
- Open-ended replacement cover will replace your house irrespective of the cost, and is the most popular. (Older houses where the wiring or plumbing has not been upgraded may not be eligible for this type of cover from some companies.)
- Sum-insured replacement cover will replace your house up to a specific dollar amount, as stipulated in the policy.
- Indemnity (or market value) cover will provide cover up to the current sale value of your house. This sort of cover is generally cheaper as you're not paying for the cost of a new product. For most people, this will be less than the cost of rebuilding, so a full claim on this kind of insurance usually means you have to sell the section and buy elsewhere.
Contents insurance
This usually covers your belongings when they are at home or temporarily moved elsewhere in the country.
The policies have a mix of replacement and indemnity cover (see above). That is, they provide replacement cover for certain items, such as the furniture and carpets, with indemnity cover for many other things.
Indemnity cover on a 5-year-old leather jacket means that if it is stolen, you'll receive a cash payment based on the original value minus an amount for depreciation.
Often, there's an overall sum insured. Most policies have maximum payout limits for specific items like jewellery. Items over this value must be separately detailed in the policy. Remember, some insurance companies require a valuation certificate for items over a certain amount. Getting a valuation for rare or valuable items is a sound idea.
Favourite things
State Insurance has introduced a contents policy called Favourite Things, which insures up to 9 items for a total sum insured of $10,000. It covers accidental and sudden loss or damage to these items while they’re in your home (or temporarily elsewhere in New Zealand) and up to $250 for accessories associated with them.
There are some catches:
- not all items are insured for replacement value
- personal liability cover must be bought separately (it’s an “optional benefit”)
- each item must be worth at least $250.
State's average Favourite Things premium for our “young single person” (see Consumer profiles) was $23 per month (sum insured $4000) compared with $52 per month ($25,000) under its standard contents-only policy. But the standard policy includes personal liability cover and Favourite Things doesn’t – so if you choose Favourite Things, make sure you also buy the “optional benefit” for personal liability.
Government levies
Your insurance premium includes a levy that goes to the Earthquake Commission, a government agency that provides EQCover.
The contents is covered on the same basis as your insurance policy. Items with replacement cover have replacement EQCover, the rest is indemnity. Because EQCover maximums are too low for many people, insurers usually offer top-up cover as part of their standard policies.
See Natural hazards for more about EQCover.
Excesses
The excess is the amount of each claim that you must pay yourself. Most “standard” excesses range from $100 to $250.
Insurers often increase standard excesses depending on claims history, location and age of the house, the likelihood of its being damaged, and whether it’s tenanted, shared with flatmates or used as a holiday home.
Some of our recommended policies charge higher standard excesses but offer cheaper premiums. Companies also offer “extra” excess options – these give a substantial premium discount for paying a higher excess.
Some insurers offer excess “refund” options. This means that if your claim is greater than the excess refund, they pay the entire claim and don’t deduct the excess. Excess refund options start at $350 for ANZ and National Bank; and at $500 for Kiwibank, Tower and TSB.
Tip: You can lower the cost of your premium by choosing a higher excess (which means you carry some of the claim risk yourself). See Ways to save for more information.
Traps to avoid
10 things you need to know about your household insurance policy:
1. Fraud doesn't pay
It may be tempting ... but little white lies can result in a claim being declined. The company may appoint an investigator if some of the information it receives doesn't add up or if an investigation is automatic for the claim type.
The Insurance Council of New Zealand (ICNZ) estimates that more than 15 percent of claims "probably have an element of fraud associated with them". It's fraud, says the ICNZ, if a claim is based on:
- facts that aren't true
- exaggerated losses
- non-disclosure of important information at the time the policy was taken out or renewed.
Tip: Insurers can check the history of claimants with the ICNZ's Insurance Claims Register. The register holds details of name, address, date of birth, and any previous insurance and claims.
2. “Legal” theft
“Malicious damage, vandalism or theft by anyone living in your home” is excluded from most house and contents policies. So usually is theft by people lawfully on the premises. Builders, friends, family, party guests and anyone else you invite on to your property – even a door-to-door salesman – are there legally.
Tip: Always keep valuables out of sight and preferably locked away.
3. Jewellery limits
Unspecified jewellery cover is usually limited to a sum such as $2500 for individual items, and the total amount of jewellery cover may also have a limit.
Some jewellery may have great sentimental value. When it's lost you may not want a replacement, just cash. But that's not how contents policies work: the insurance company has the right to have the jewellery remade.
Tip: Colour photographs, valuations, original receipts and detailed descriptions of the metals and gems makes it much easier to get a fair settlement.
4. Mobile phones left unattended
Many claims for lost mobile phones are declined because phones were left “unattended”. Insurers expect you to take “reasonable precautions” to avoid theft, and limit their liability if you don’t. Their view is that you should take reasonable care of your property rather than rely on insurance cover.
Tip: The word “unattended” is subjective. Argue the case if your claim is declined.
5. Older children may not be covered
In many cases children's belongings are only covered if they "normally live with" the parent who has the policy. Failing to declare your children's criminal convictions - including when you renew the policy - also leads to claims being turned down.
Tip: If you have kids away studying take out a separate contents insurance policy for them, including public liability cover.
6. Goods stored or in transit
These aren't necessarily covered by your contents insurance policy.
Tip: Check before moving if your goods are covered to their full value by the mover or by your house and contents policy. If they're not, take out separate removal cover.
7. Business equipment at home
Working from home may mean the cover for your personal equipment under your home contents cover is limited because you're using it for "business purposes". "Business" doesn't just mean self-employment. It means any working from home even if you're not being directly paid for it.
Tip: Other tools of trade such as builders' equipment may not be covered by your home contents policy - especially if they belong to your business.
8. No building consent
If you don’t have a building consent, your insurance policy won’t pay out if the building work is the cause of a claim. For example, if you got electrical work done without a permit and it sparks a fire – your policy won’t cover the resulting damage. The same applies if you install a woodburner without a building consent and it causes a fire in your house.
Even if a house is destroyed by another cause, the insurer won’t pay for reinstating any building work done without a consent or for getting new consents.
Many people also get caught by policy exclusions for “fixing any fault, defect, error or omission in design or specification”. An insurer declined a claim for a failed retaining wall because the wall had been incorrectly constructed.
Tip: Check with your local council before you get building work done. There’s often confusion about what needs (or doesn’t need) a building consent.
9. Contract-works insurance
The Insurance & Savings Ombudsman gets cases every year where homeowners have invalidated their house insurance because they were getting work done on the property. Always take out contract-works insurance for building projects or get it as an extension to your house policy. Insurers say there’s additional risk from a building project – and we agree.
Tip: You may not need contract-works cover. But it’s best to find out by asking your insurer.
10. Get it in writing
Many claims are declined by insurers for non-disclosure of material information even though the homeowner swears they’ve disclosed X, Y or Z to the company. That’s because there may be no written record. Sometimes the insurer cancels the policy once it knows more about the risk.
Tip: Make sure you read the policy and any information from the insurer about what was said when the policy was arranged. Also email to your insurer your notes from conversations, to be kept on file.
Natural hazards
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.
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.
Making a claim
Before you make a claim, read your policy and gather your facts - in writing if possible.
You should keep written records of all conversations including names, dates, times, and details of what was agreed.
You can also take a look at the Fair Insurance Code on the Insurance Council's website. The code applies to all insurance policies bought directly from companies belonging to the Insurance Council, or through a broker or agent. This sets out member companies' responsibilities to you and how to complain if companies don't carry out their responsibilities.
What if you're turned down?
Complain. It may be that your insurer has misinterpreted the facts. What's more, if there's a grey area then a complaint might just push your insurance company to pay out.
One term well worth knowing is: "ex-gratia". It means "out of the goodness of my heart". When the insurance company makes an ex-gratia payment, it pays out but doesn't accept legal liability for the claim. These are cases where it's probably cheaper for the insurance company to pay a bothersome client than to fight the case through the courts.
Unless you can resolve the dispute easily, you'll need to send a formal complaint to the insurance company. A form for this can be downloaded from the Insurance Ombudsman's website.
Our Letters that Get Results may help you if your claim is turned down. These include the following:
However, there are times when arguing with the insurance company will get you nowhere. In that case, you may want to take your claim to the Insurance Ombudsman. You'll need to get a "letter of deadlock" from the insurance company, so that you can then lodge a complaint with the Ombudsman.
Prevention is better than payout
Perhaps the best way to avoid being turned down for a claim is make sure you don't have to make one in the first place. One of the best preventive measures you can take is to keep your house well maintained.
Consumers are often shocked to find they are not usually covered for rotten walls, floors or cupboards. This type of damage, which occurs gradually, is limited or excluded from policies. Yet it is one of the biggest causes of house and contents claims.
What we claim for
Knowing the types of goods that most people lose or damage - and how they do this - is the first step in preventing loss.
The most commonly claimed items under household-contents claims are:
- spectacles, sunglasses and hearing aids
- jewellery
- appliances such as TVs, stereos, playstations, and computers
- cameras
- CDs and DVDs
- cash
- power tools
- mobile phones.
The main causes of "loss" (from most to less common) are:
- glass breakage
- gradual damage such as water damage
- water damage from burst pipes, leaking roofs, or leaking water cylinders
- burglary
- storm damage
- carpet damage from spills such as red wine, coffee or nail polish
- lost items
- freezer breakdown
- accidental damage such as dropped appliances, holes in walls, or damaged doors.
Burglary
Despite its prominence in the media, burglary isn't top of the list - although you're likely to suffer a greater loss from burglary. To reduce the risk, record the serial numbers of your possessions and photograph your valuable items.
Burglars are deterred when there are stickers on the house saying serial numbers have been recorded. You can find out about this from the Insurance Council's website, including a downloadable serial-number recording form. Serial numbers and photos make claims processing much easier.
Consumer profiles
We've created a series of typical consumer profiles, and made recommendations for each profile. Check which one most closely resembles your situation.
- For each profile we rated the companies on both their overall average premium and our assessment of their policy cover. Our recommendations are based on a combination of good price and good cover - with policies scoring at least 4 stars for premiums and cover.
- Our focus is on open-ended replacement house policies, as these are far more popular than sum-insured cover. (See How insurance works for more information.)
- Not included in our survey are Farmers' Mutual Group (FMG) and Medical Assurance (their policies are only available to people in certain geographical locations or professions); AMP, Lumley, NZI and Vero (these companies sell exclusively through brokers or other brands rather than directly to the public); Ansvar and HSBC (these companies declined to take part in our survey).
- We used an average house price in each region: $275,000 in Napier, $310,000 in Christchurch and $470,000 in Auckland.
- All the recommended insurers (or their underwriters) are members of the Insurance and Savings Ombudsman scheme.
The profiles: Single and flatting | Young couple | Family with teenagers | Retired couple | Family of two
Single and flatting (contents cover only)
Contents only ($25,000)
Todd is 23 and wants $25,000 contents-only insurance (with personal liability cover). He shares a flat with two friends.
Our pick offered both cheap cover and extensive coverage for Todd. There are cheaper options from AMI, ANZ, ASB, FinTel, Kiwibank, Lantern, and National Bank – but these are “basic” policies. While they keep their premiums down, they give limited cover (there’s a greater emphasis on indemnity or present-day value rather than replacement value, and the cover limits on individual items are lower).
TSB Bank has a minimum of $40,000 cover. Westpac’s minimum is $34,500 for this profile. It also offers more limited Renters' Cover, but this only provides Todd with a maximum sum insured of $23,000.
See Contents-only policies compared for details of all the policies we looked at.
Young couple
Replacement value house; contents ($110,000)
Pete and Rebecca (both 35) want $110,000 contents and "replacement" house insurance for a 175 square metre house built in 1982.
See House and contents policies compared for details of all the policies we looked at.
Family of four
Replacement value house; contents ($130,000)
Rupert and Gail (both 50) and their two teenage children want $130,000 contents and "replacement" house insurance for a 175 square metre house built in 1982.
See House and contents policies compared for details of all the policies we looked at.
Retired couple
Replacement value house; contents ($90,000)
Stewart and Patricia (both 70) want $90,000 contents and "replacement" insurance for a 112 square metre house built in 1982.
ASB, BNZ, PSIS, State, and Tower all offer a special benefit solely for their customers aged 55+. There’s no excess on the first claim in each insurance period for spectacles, contact lenses or dentures.
See House and contents policies compared for details of all the policies we looked at.
Family of two
Replacement value house; contents ($110,000)
Glenys (45) and her daughter Katie (17) want $110,000 contents and "replacement" insurance for a 112 square metre house built in 1982.
See House and contents policies compared for details of all the policies we looked at.
Cover for renting
Landlords
Check your existing house and contents’ policy for rental-property cover – including the policy’s “additional benefits” section. If your rental property’s not covered, you can usually buy a separate policy for damage by tenants or pay for it as an additional benefit on an existing policy.
You can also get cover for loss of rent because of a natural disaster: this can be for up to a year or up to $40,000 depending on the company.
Rugby World Cup
If you’re thinking of making a quick buck by renting out your house to Rugby World Cup fans, then you must tell your insurance company first because it might want to amend your policy. We also advise getting references, having a written tenancy agreement that complies with the Residential Tenancy Act, collecting a bond, inspecting the property before and after the tenancy, and removing all high-value items from the house.
Tip: Most standard policies exclude theft or malicious damage by someone lawfully on your premises (such as a tenant).
Renters
Most contents-only policies we looked at offered tenants $1 million cover for personal liability (this is essential in case of damage to their landlord's property). For a natural disaster most companies offer renters limited temporary accommodation cover of up to 6 months or $5000. With a few companies you may be able to find higher cover of up to 12 months or $25,000 – check with your insurer.
Rising premiums
Premiums for most of our consumer profiles have increased by over 10 percent since our last survey – a result of insurers looking to recover costs from the first Christchurch earthquake. And now Christchurch has suffered a much more devastating second earthquake, which will put even more pressure on premiums: the repair bill is likely to run to tens of billions of dollars.
The major factors in these soaring premiums are high number of claims, escalating building costs, and the extreme nature of recent natural disasters. Premiums will continue to rise if insurance companies are to stay in business after paying out for major claims from the Christchurch earthquakes.
People in the Christchurch area may have to pay additional excesses if they made more than one claim after the two major earthquakes. A related issue is whether insurance companies will be willing to cover homes in some affected areas when policies come up for renewal – and by how much premiums will increase if cover is available.
We look at the issues involved in insuring your property against natural disasters in our Natural disaster insurance report.
Several companies haven’t changed their cover since last year but their premiums have gone north. Quotes from most of the companies for our “young single person” profile were similar to last year but Westpac’s increased by nearly 30 percent (going from $58 to $73 per month).
Ways to save
Shop around
Get at least 2 or 3 quotes. You could save hundreds of dollars.
Shop separately for car and house and contents
Our survey found some insurers charge above average premiums in one area and below average in another.
Negotiate!
If you rarely make claims and your premiums are increased, ask your company for a better deal before walking away. If you think the company is unfair at claim time, push for better. Note: Most companies set a minimum premium.
Discounts
You can also make significant savings on your home and contents insurance by chasing discounts.
Multiple policy
If you have your house and contents insurance with the same insurer, you should get a discount. We strongly recommend this approach and have based our premium analysis on it.
Higher excess
The excess is the amount of each claim that you must pay yourself. It's usually around $100 to $250 for house and contents – but taking a $1000 excess can cut your premium almost in half with some companies.
Age discounts
Some insurers offer these from ages 50 or 60. They range from 15 percent to over 40 percent.
Security alarms
The alarm must usually be professionally installed and in some cases monitored. You'll get a discount of 5 to 20 percent.
Other discounts
You can also save money by paying your premium annually rather than monthly. Most companies will lift your premium by as much as 10 percent if you pay monthly.
Our advice
- Some insurers offer much better cover than others, and the differences are not always reflected in price.
- Many people will be able to save hundreds of dollars on their premiums, without sacrificing the extent of their cover.
- Use our consumer profiles to make a shortlist of insurers. Check which one most closely resembles your situation. We've identified the insurers we think are best for each profile - with low premiums and comprehensive cover.
- Get full details of the policies and make sure they have suitable cover for your situation.
- Then, shop around. Select at least two insurers and ring them for quotes. Then ring your existing company. If it doesn't offer the best deal, say what you've been offered and ask them to go one better. It's surprising how often this works!
More information
- Earthquake Commission: www.eqc.govt.nz
- Insurance & Savings Ombudsman: www.iombudsman.org.nz
- Insurance Council of New Zealand: www.icnz.org.nz