How to buy the best house and contents insurance

House insurance

House insurance covers most structures on your property – your house, garage and fences.

Most policies also cover your retaining walls and recreational features (for example, swimming pools) but the cover is often capped. You can increase these caps for a higher premium.

Some insurers offer different types of policy with different levels of cover:

• Basic policies may only cover you for major adverse events such as fire, theft or flood.

• Comprehensive policies cover you for major adverse events and for accidental damage to your house caused by you or your family.

Both types of policies cover your legal liability if you accidentally damage someone else’s property.

It’s important you have enough cover because you don’t want to be underinsured.

Unless you have a full replacement policy, the maximum insurance companies will pay is the sum insured. If the rebuild costs are more than the sum insured, you will have to meet this cost.

Homeowners are responsible for estimating the sum insured. If you haven’t specified a sum insured, you’re probably relying on the insurer’s default sum insured – an estimate based on the size of your house and a typical rebuild cost.

If you rely on the default sum, you risk being caught short if disaster strikes.

If you choose a higher sum insured, you’ll be charged a higher premium. But it might not be much higher. Ask your insurer how much an increase will cost. A slightly higher premium is a good investment to make sure your house is fully covered if it’s a total loss.

Contents insurance

Contents insurance usually covers your belongings when they're at home or temporarily moved elsewhere in the country.

Contents insurance is also offered at different levels:

• Basic policies may only pay the “present value” for your contents (the cost of repairing or replacing an item, so you’re left with something in the same general condition). Some policies only cover items damaged by defined events such as fire and theft. Others provide limited or no cover for items damaged while they’re temporarily removed from your home.

• Comprehensive policies offer a mix of present and “replacement value” (that’s the cost of replacing the item or repairing it to an as new condition). They also cover your contents for accidental damage – not just defined events – in your home and while they’re temporarily removed.

It always pays to check the cover: what’s standard in one policy may be an optional benefit in another – or may not be covered at all. This includes credit cards, jewellery, keys and locks, professional tools and equipment kept at home, and items damaged during cleaning.

Some insurance companies require a valuation certificate for items over a certain amount.

Excesses

If you make a claim against your house or contents policy, you’ll probably have to contribute the first few hundred dollars towards the repair or replacement. This is called the excess.

The standard excess for house and contents claims is between $250 and $400, depending on insurer.

You need to think carefully before making a small claim. As well as the excess, you can end up with a higher premium when your policy’s renewed. You can also lose your no-claims discount – and this discount can reduce your premium by as much as 40%, depending on your policy.

Tip: You can lower the cost of your premium by choosing a higher excess (which means you carry some of the claim risk yourself).

EQC cover

Your house insurance premium includes a levy that goes to the Earthquake Commission (EQC).

The Earthquake Commission’s cover is called EQCover. It kicks in after an earthquake or other natural disaster, but you usually need to have private insurance to be eligible.

EQCover pays:

• for damage to your home up to $300,000

• for damage to your land under your home and within 8m of residential buildings and structures. Land under or supporting the main access ways (but not the driveway paving itself), to up to 60m from your home, is also covered. There is some cover for bridges, culverts and retaining walls.

If you’ve been denied private insurance, you can apply to EQC for Direct EQCover. It’s decided case-by-case, and you’ll have to prove you’ve been unable to get private insurance.

If you can’t afford full cover from an insurance company, you could ask if it offers a fire only, or fire and burglary policy. This would be cheaper than all-risk cover and would mean you were still entitled to EQCover.