House and Contents
House insurance is designed to protect, what for many people, is their most valuable asset - their house. There are three typical types of House Insurance cover available:
Fixed sum insured policy
Under this policy, the insured and the insurance company agree on the sum insured, and the company agrees to rebuild or repair the house up to that limit, including all the fees involved, if it is totally destroyed. It's important that you understand what your home's Sum Insured covers and what it does not, and what you may need to do when your home policy renewal.
Why it's important you check your Sum Insured?
It's important your home's Sum Insured amount reflects the potential cost of rebuilding your home as accurately as possible, because if your house is ever destroyed, your insurer will pay no more than the Sum Insured amount, even if the actual cost of rebuilding your home turns out to be greater. Your sum insured should not be based on the market or rateable value of your house.
So, if you set the Sum Insured amount too low and you need to repair or rebuild your house, you may have to rebuild to a lesser size or quality, or pay for some of the repairs or rebuilding yourself.
And if you set the Sum Insured amount too high, you may be paying too much for your home insurance, because if the cost of rebuilding your home turns out to be less than the Sum Insured, the policy does not require the insurer to pay more than the actual cost of rebuilding.
Why is it important to check the rest of your policy schedule?
Your policy schedule, sent to you every year as part of your policy's renewal, contains the information that your insurer has about your home.
You should always check that this information is correct and up-to-date. For example, if your home includes extensive Retaining walls, you should check if these are noted on your Policy Schedule.
Equally, if you have made improvements to your home since you took out or renewed your policy, you should inform your insurer and decide whether you should increase your home's Sum Insured to reflect the improvements.
From time to time, your insurer may make adjustments to the excesses payable at claim time, or introduce new excesses. It also pays to check the information that comes with your policy renewal for more information about these.
What about Retaining walls and Recreational Features?
Retaining walls and Recreational Features - i.e. permanently fixed swimming pools and permanently fixed spa pools and tennis courts - may have limited cover. In your policy this is called a policy limit or cover limit. If the likely cost of rebuilding these is more than the cover provided automatically by your policy, you may wish to specify these on your policy and purchase additional cover. Your home's Sum Insured will then increase accordingly. This will likely affect the premium payable for your home cover.
Some home policies no longer provide any level of cover for these features. In this case you'll need to decide if you'd like to purchase cover so that your Recreational Features and/or retaining walls are protected.
What about Special Features of your house?
Special Features are not automatically covered under any most home policies. These could include jetties, wharves, private landings, permanent fords or dams, bridges and culverts, cable cars and private utility plants such as wind or water mills or diesel generators. If you require cover for any of these features you'll need to talk to your insurance provider and this will likely affect the premium payable for your home cover.
Fixed floor coverings
Fixed floor coverings such as fitted carpets are sometimes included in home policies underwritten, so it's a good idea to include an amount for them in your Sum Insured. The calculator on this site does not build in an allowance for the costs of replacing fixed floor coverings, so you will need to add this in to the figure produced by the calculator.
Total replacement policy (no sum insured)
Under this policy, if a house is destroyed, the insurance company will rebuild or repair the house up to the number of square metres insured and pay all the fees involved in the process (i.e. architect, site clearance fees).
Indemnity policy (present day value)
Under this policy, the insured will be covered for what the house was worth just before the loss. As above, the insurance company may rebuild or repair the house up to that limit.
What about premiums, what does it cost?
As well as reflecting your home's insured value, the premium you pay for your home insurance reflects the cost of reinsurance that insurers are required by legislation to hold as well as administrative costs. Your premium also includes Earthquake Commission and Fire Service levies and GST.
Example of what's included in a $1000 Home Insurance Policy Premium (December 2013)
|Insurance company premium||$405 (40%)|
|Fire Service Levy & Earthquake Commission Levy||$226 (23%)|
Contents insurance covers the contents of the home, including household possessions, furniture, clothes, appliances, carpets and curtains. Tenants should also ensure their contents insurance covers personal liability for damage to the landlord's property, as tenants will generally be liable for any damage they, or their invited guests, cause intentionally or carelessly to the property.
Most contents policies have claims limits, especially for valuables, money, documents and collections. Different policies have different restrictions and there may also be specific conditions to the cover.
There are two specific covers available:
Under this policy, the insurance company will replace a lost or destroyed item with a new one, or repair the item so it is as new. However, there are some limits to this (i.e. items over a certain age may not be replaced). If cash is wanted, the insured can only get the indemnity value of the item (see below). There is also an upper limit on what can be claimed either in whole or by category of contents and this will be specified in the insurance policy as the sum insured.
Indemnity policy (present value)
Under this policy, the insured will be put back in the same position they were in before the loss or damage occurred. The settlement is based on how much would be paid for the item at the exact time of loss or damage.
Frequently Asked Questions about Contents Insurance
What if I still live with my parents?
If your parents or guardians have a comprehensive contents insurance policy, then there is a good chance that all of your possessions will already be covered. You should check with them to see whether they have insurance, and what it covers. If they have no insurance, or if you have some particularly special valuable possessions, then having your own contents insurance is an option.
What if I am flatting?
Contents insurance can be a popular option with people in flatting arrangements because it can cover any damage that you might accidentally do to your landlord's flat and possessions, as well as your possessions. Just make sure you talk to your insurance company and check whether they will cover you if you break your landlord's appliances or contents. E.g. if you break your landlord's fridge, your contents insurance may cover the cost of a replacement.
What if I live in a University Hall of Residence?
If your parents have a comprehensive contents insurance policy, then you may still be covered by them - even if you're in a Hall in a different city. It's best to get your parents to talk to their insurers. If your parents don't have contents insurance, then you may want to think about getting your own. Many University Halls suggest it during your orientation, especially for important things like your laptop or phone. If you are worried then you can talk to your student advisors or RAs at your Hall, or check with your University Accommodation Service.
Will my possessions still be insured if I take them outside my house?
Yes, usually your contents will still be insured if you take them to school, work or on holiday with you - unless you take them outside of New Zealand. Just check with your insurance contract or your insurance company if you are worried.
What happens if my flatmate breaks my possessions?
Usually your possessions will still be covered, as long as you have made an effort to protect your belongings. It's a good idea to check with your insurance company to make sure though.
What happens if I break my flatmate's possessions?
Your contents insurance probably won't cover anything that your flatmate owns. If your flatmate has contents insurance then their insurance company will pay out for it.
What if I have stuff in a self-storage facility?
You should advise your insurance that are moving contents to a self-storage unit. Don't automatically by your contents policy. Most times you have will have take out special, short-term cover to protect your assets in a self-storage facility.