Insurance cover limits

Limits may apply to insurance cover for high-risk, large or valuable homes.

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Limits may apply to insurance cover for high-risk, large or valuable homes.

A Consumer member, Sarah*, contacted us after her insurance company AA Insurance, wrote advising it would not be renewing her family’s home insurance cover for their Auckland address, although it was still willing to provide contents-only cover.

Sarah's house is large at 501 square metres. The property has a Capital Valuation of $2.85 million. The house and other land improvements make up just over $1m of that. The high value of the improvements put it outside the AA's standard underwriting guidelines.

This left our member in a pickle with the family’s house and contents insurance set to lapse this month. Sarah says they hadn't made any house or contents insurance claims in their 8 years with AA Insurance.

AA Insurance's response

AA Insurance says it has reviewed properties it insures to improve overall service. It has identified a small number of higher value, large or unusual homes which fall outside its standard underwriting guidelines.

The company says the Canterbury earthquakes, among other things, highlighted "certain types" of homes absorbed a disproportionate amount of resources when the owners made a claim. These greater claims costs were passed on to other policyholders through higher premiums. AA says to manage the affordability of home insurance and good service to the majority of customers it has decided not to offer renewal to a small number of policy holders.

Other companies

We also contacted other companies to see if they would cover someone in Sarah's situation. None had changed the criteria for coverage but some had limits for high risk, large or more valuable properties. ANZ and National Bank, for example, ask additional questions for houses over 400m². With Westpac it’s 500m² and it also requires a reinstatement valuation and will only cover the home on a sum insured basis. High risk, large or valuable properties' cover are evaluated case by case.

In the meantime Sarah is using a broker to find a new insurer.

If you own a high risk, large or valuable house and find your insurance company no longer covers your house and contents, it’s worth shopping around. It could be worth using a broker. Some companies may take you on but reduce the financial risk of paying out expensive claims by offering sum insured replacement rather than actual replacement value.

*name has been changed to protect privacy.

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