House and contents insurance policies

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 are what we surveyed. They 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 is important that you have enough cover because you don’t want to be underinsured.

Sum insured

Unless you have a full repayment 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 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.

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).

Until a few years ago, most insurers offered full replacement policies. This meant they’d pay to rebuild or repair your home to bring it back to its pre-event standard.

However, after the Canterbury earthquakes, almost all insurers changed to sum insured policies. This shifted the onus to the homeowner for estimating what it would cost to rebuild their home and then insuring it for that amount.

According to Treasury, the switch to sum insured means an estimated 85% of New Zealanders are under-insuring their homes and could be left out of pocket if a disaster hit.

Full replacement

Medical Assurance Society (MAS) is one of the few providers offering full replacement policies. Its cover is pricier than many insurers in our survey, though you’re getting more for your money than with insurers providing sum insured policies.

MAS customers rate it highly for service. In our latest customer satisfaction survey, the company topped our table: 92% of customers with its house insurance were highly satisfied.

MAS is a membership-based organisation. Traditionally, membership has been open to those in health-related fields, such as doctors and dentists, but it is now open to other professionals.

FMG also offers full replacement cover. Its policy is cheaper than MAS’. However, cover is only available in rural areas and specific provincial locations. The company rates well for customer service: 81% of its customers in our survey were very satisfied.

Limited full replacement

Some insurers offer policies that provide full replacement for events other than natural disasters – for example, you’d get a payout for full replacement if your house burnt down. You still have to stipulate an amount you want the house insured for in the event of a natural disaster.

AA Insurance offers full replacement for events other than natural disasters. The company rates above average for customer satisfaction with 64% of its house insurance customers in our survey very satisfied.

It declined to provide premiums, so we used its online calculators to get prices. In Auckland, Hamilton and Dunedin, its premiums were usually lower than the median.

Online quotes weren’t available for Wellington and Christchurch. The company is still providing cover in these areas, subject to its underwriting criteria.

Tower and the brands it underwrites, Trade Me and TSB, offer full replacement cover for fire. For everything else, they offer sum insured cover.

Trade Me quoted the highest prices for our Christchurch properties. For our large house, its price was nearly $300 ahead of the next most expensive premium – making you wonder whether it wants any garden city customers.

With Trade Me’s policy, you’ll also have to pay extra to get cover for temporary accommodation after an event, garden retaining walls and landscaping, and recreational features (such as swimming pools).

Tower offered the cheapest price for our large house in Auckland. But the insurer doesn’t rate well when it comes to customer satisfaction. Just 37% of customers in our survey were very satisfied and it had the highest number of dissatisfied punters (14%).

Sum-insured only

Eight of the insurers we looked at only provide sum insured policies.

Insurers have default sum insured amounts for homes, but don’t just assume this will be enough to rebuild your home. It’s your responsibility to make sure the sum insured will provide adequate cover.

In a natural disaster, people with private insurance are also covered by EQC (see “When house insurance becomes too pricey”), but payouts on homes are capped, so it’s important your policy with your insurer will cover remaining costs.

Of the eight insurers offering sum insured cover, prices varied depending on region and house size.

Youi had the highest prices in Auckland and Wellington. Its premium for house and contents cover was close to $6000 a year for our large home in Wellington – $2800 above the median. The company would not give us quotes for our Hamilton or Christchurch addresses, due to the “risk of inundation” at the locations.

Lantern also stood out for its pricey premiums, with the highest quotes for our properties in Hamilton and Dunedin. The company rated below average for customer satisfaction in our survey.

State Insurance offered the cheapest prices in Christchurch. However, it also rated below average in the satisfaction stakes.

Of the five centres we looked at, Wellington has been hardest hit by premium hikes. Since our 2017 survey, the median price for house and contents insurance for our standard home in the capital rose to $2160 from $1750 a year and for our larger home to $3164 from $2684.

Christchurch was next worst, with the median premium for the city’s homeowners up between 15 and 18% compared with 2017.

Trade Me Insurance provided the cheapest premiums in the garden city back then, but this time round it’s the most expensive. It’s increased premiums by 61% for our standard home and 67% for our large home.

Why the increase?

Insurers might tell you premiums have risen because earthquake and fire levies have increased. But that doesn’t explain some of the biggest hikes we’ve seen. The maximum a homeowner is charged for an Earthquake Commission (EQC) levy is $276 (up $70 in the past year) and $127.20 (up $36) for the Fire Service levy.

So what’s the rest of the story?

Tower, Trade Me and TSB (all underwritten by Tower) shifted to full risk-based pricing for earthquakes in June 2018. State and AMI (underwritten by IAG) followed in July.

This means if you live in an area at a higher risk of earthquakes, you’ll be charged more for insurance. Sometimes insurers consider this risk at a regional level, sometimes at a “granular” level – your specific address.

Climate change impacts are also entering the mix. A 2018 Reserve Bank report said insurers were adjusting premiums to reflect climate risks, such as coastal erosion and extreme weather events, and predicted some properties would ultimately become uninsurable (see “When house insurance becomes too pricey”).

It warned this would have flow-on effects not just for property owners, but for mortgage lenders, which would need to account for these risks when making lending decisions.

We asked insurers to quote annual premiums for comprehensive policies for three profiles:

Renter: our young worker wants contents-only insurance for belongings worth $35,000.
Standard home: our couple wants to insure their home for $400,000 and their contents for $90,000.
Large home: our family of four wants to insure their home for $800,000 and their contents for $140,000.

We’ve made these assumptions:

• Our couple and family own the homes they live in. Our young worker rents with two others.
• No one has made a claim in the past five years.
• No one runs a business from home.
• All the properties include a single-storied stand-alone home and a carport. The homes have weatherboard cladding, a corrugated steel roof and an alarm (which isn’t monitored).

Most companies offered discounts for taking out combined house-and-contents policies and for being claims-free for a set number of years. We accepted these discounts. Other discounts are noted in our premium comparison tool below.

Your 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 have to have private insurance to be eligible.

What it covers

In an earthquake, EQCover pays:

• for damage to your home, but it’s capped at $100,000 plus GST. This increases to $150,000 plus GST in July 2019.
• for damage to your land. There is no cap on this, but it is restricted to land under and within eight metres of your home. It may cover land supporting access to your home (but not the driveway paving itself), up to 60 metres from your home, and some bridges, culverts and retaining walls. Private house insurance policies don’t cover land, earth or fill.
• for damage to your contents, up to $20,000 plus GST, with exclusions (such as no cover for property used for commercial purposes, or artwork or jewellery). There will be no EQCover for contents from July 2019.

Other events

For other events, such as floods and storms, EQCover is only for land damaged. Just like private insurance policies, there are several conditions to meet and exclusions – it’s worth checking the fine print on the EQC website before disaster strikes.

If you’ve been denied private insurance, you can apply to EQC for Direct EQCover. It’s decided case-by-case . You have to prove you haven’t been able to get private insurance. Less than 500 properties have got Direct EQCover.

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.

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.