What is included in house and contents insurance?
A house insurance policy covers you for events affecting the house (e.g. a fire), while a contents insurance policy covers for events which affect property inside the house (e.g. theft or damage).
You can get home and contents insurance in one package (e.g. if you own the house and live there), get contents insurance only (e.g. if you are a tenant or flatmate) or get house insurance only (e.g. if you own a house which you are renting out). In the latter cases you don’t have to have the same insurer for both types of insurance.
The three main types of house or contents insurance are:
- Total replacement – if your house is destroyed or damaged the insurance company will rebuild or repair it and cover all the costs involved.
- Fixed sum insured – you and your insurance company agree on an amount that your house or contents will be insured for. This is the maximum they will pay to rebuild, repair or replace your house or contents.
- Indemnity - if the house or contents are destroyed (or your contents are stolen), you’ll receive an amount equal to what the insured property was worth just before the event occurred. This amount may not be enough to rebuild your house or replace your possessions, but it can be a cheaper type of policy than the other two options
Many insurance companies do not offer full replacement house insurance (more about this is on the Insurance Council of New Zealand (ICNZ) website), and usually will be responsible for deciding how much to insure your house for – the amount will depend on the size, quality and age of your house, among other things. See the next question for more about this.
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If I’m insuring my house for a fixed sum, how do I work out how much to insure it for?
When you insure your house for a fixed (capped) sum, you need to estimate how much it would cost to rebuild the house if it was destroyed (e.g. in a fire or earthquake), taking into consideration that building costs generally increase over time.
If you have to make a claim on a fixed rate home insurance policy, the insurance company will have your house rebuilt up to the insured amount.
It’s really important to arrive at an insurance amount which is as accurate as possible - if you underestimate the insured amount, you will not be able to rebuild your home to the same size or standard; but if you overestimate the insured amount, you will end up paying too much in insurance premiums. You can’t hold the insurance company liable if you get the sum insured amount wrong.
Your two best options for deciding on an insurance amount for your house are:
1. Use an online tool which is designed to calculate this amount. By inputting details about your house and other aspects of your property (e.g. size, geographical location, age).
The one used by many insurance companies in New Zealand is the Cordell Comprehensive Residential Valuer. This tool factors in the possibility of increased costs due to inflation, but not the cost of things like landscaping or temporary accommodation for the household.
If the calculator does not ask about an aspect of your house which you think is very important, consider the next option instead.
2. Pay a quantity surveyor, valuer or builder to provide an estimate. This might be a better option if your house is very large (more than 700 square metres) very expensive (costing more than $2 million to rebuild), or has special features (e.g. luxury interior fittings).
With a fixed sum insured policy it is very important to keep it up to date (for example if you renovate or add to your house) and to keep up with changes in the cost of construction (e.g. as a result of a change in building code).
If you are currently building a home, it’s a good idea to ask the builder for a schedule of the materials used, so you can use it to help you estimate the cost of rebuilding in the future.
You can read more about this on the need2know website. Although it is aimed at clients of IAG-owned insurance companies, the content is also relevant to anyone in New Zealand wanting to know about fixed sum house insurance.
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Why is it important to inform the insurer about particularly valuable items for my contents insurance?
If you have an unusual or valuable item (e.g. an expensive ring or stamp collection) you need to mention this when obtaining a quote so that the insurance company can adjust their premiums or offer additional cover for the item.
For example, if your contents insurance covers you for up to $500 worth of jewellery, and you have a $1000 ring, you can get separate insurance cover for that ring – otherwise, if the ring is lost or stolen you will only receive half the amount of money that your ring is worth.
Make sure you have the cover you need. If you need help interpreting your policy, consult your insurance broker or insurance company in the first instance.
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What do insurance companies mean when they talk about 'accidental damage'?
House and contents insurance policies usually include cover for damage caused by certain types of events, for example fires, storm damage, floods, burglary, or vandalism (this is called Defined Events cover). These events are standard for insurance policies because they are likely to cause expensive damage.
If you include accidental damage cover to your house or its contents, you will also be covered for events such as accidentally spilling water onto your computer and damaging it, accidentally burning your sofa with a lit cigarette (for contents insurance), or accidentally putting your foot through the ceiling while up in the attic (for house insurance). Accidental damage cover normally costs more than Defined Events cover.
You need to be aware that damage caused deliberately is not covered, nor is damage resulting from wear and tear. (See the next question for information about "gradual damage").
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My insurance company says that I am not covered for damage that was caused gradually e.g. a leak which has rotted my floorboards. Is that right?
In general, house insurance policies cover for sudden and accidental damage (see the previous question), but provide only limited cover (if any) for “gradual damage”. An example of gradual damage is rotten floorboards resulting from a water leak over a long period of time. Your insurer will be able to determine whether damage is gradual, for example if there is visible rot in the floorboards and carpet, and mildew or mould on the surfaces.
If your policy provides you with some cover for gradual damage, it will probably only cover that which has occurred under very specific circumstances and only cover you for a limited amount (for example, the damage must have occurred in the time you lived in the house, and would be limited to a fixed dollar amount). It probably will not cover the cost of, for example, locating the leak that caused the damaged.
Otherwise, if your policy doesn’t cover you for gradual damage, or the specific circumstances of the damage aren’t covered, then your insurer has the right to decline your claim.
More information about “sudden” vs “gradual” damage is on this Insurance & Financial Services Ombudsman information sheet.
If you believe your insurance company has wrongly denied your claim, you can contact the financial services disputes resolution scheme they belong to for advice and to make a complaint.
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I was hit by a car and injured – now I’ve received a letter from the car owner’s insurance company saying I am liable for the cost of repairing the damage to the car! Can they do this?
When an insurance company pays out on a claim resulting from damage by another party, they will try to get back some or all of the money from the other party.
Therefore if the car owner’s insurance company decides that you are the cause of damage to the car, they can pursue you for the costs of repairs to that car.
However, if you have contents insurance then it’s likely that your contents insurance will cover you – and any family members living with you - for this situation. You will need to check your contents insurance policy or contact your insurer to check.
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Is there someone who can advocate for me, to help me get my claim settled favourably?
Most insurance advocates or independent assessors are based in Christchurch, following the Canterbury earthquakes and subsequent disputes over house insurance claims. They provide assessment and advocacy services for a fee calculated as a percentage of the amount you successfully claim from the insurance company:
There have been instances where a homeowner sought an independent assessment and used it to take their insurer to court. Going to court can be a lengthy and costly process, so if you are thinking of doing this you should seek legal advice.
For most people, concerns about unfair behaviour from their insurer can be referred to the appropriate financial services disputes resolution scheme (in most cases this will be the Insurance and Financial Services Ombudsman). See the next question for more information.
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If I need to make a claim against both home and contents insurance do I have to pay both excesses?
In general you would have one insurance policy to cover your house and another to cover the contents (you might also have separate policies for high-value items such as jewellery or artworks). In most cases each policy will have an excess (an amount you have to meet when you make a claim).
For example, if your house and its contents are damaged in a fire, you would need to make a claim on more than your house insurance policy and your contents insurance policy – and would have to meet the excess associated with each policy.
If damage or loss to your house or contents was to occur in two or more separate events (e.g. a burglary followed some time later by vandalism), then you would have to file a claim for each event and meet the associated excess for each claim.
There is more information about excess in this factsheet from Insurance and Financial Services Ombudsman, but it’s a good idea to check your policy to be sure.
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Is my house insured in the event of a natural disaster?
If you have house and contents insurance and it includes cover against damage by fire, then you’ll be covered for natural disasters either by your insurer or the Earthquake Commission (EQC). It’s important to be aware that you are only covered by EQC if you have a private insurance that covers fire damage.
EQC cover is up to $100,000 for replacement of your house and up to $20,000 of your contents. The policy with your insurer will generally give additional cover, up to the maximum in your policy. So, for example, if you have insured your house for $350,000 then the EQC cover will be up to $100,000, leaving your insurers to cover the remaining $250,000.
If your house or contents are damaged in a natural disaster such as earthquake, flood or landslip, it’s important to:
- contact your insurer as soon as possible to advise them of the damage, and find out what documentation you’ll need
- contact EQC within three months of the damage occurring
- gather the documentation you need e.g. photos of the damaged areas to support your insurance claim
- if you have to throw anything away (e.g. perishables from a broken fridge) make sure you have evidence of the damage before you dispose of anything
- if you have to get urgent repairs done (e.g. to your toilet) keep anything which is replaced and keep a copy of the bill
- put off cleaning up at least until you’ve done the above (you may wish to wait until after the assessor has visited)
There’s more advice on the EQC’s Householders’ Guide to EQCover.
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Do I have to provide proof of ownership when claiming for contents items?
If you make a claim to your insurance company you may be asked for some proof of the loss. For example, if your stereo was stolen in a burglary and was only a few months old, they would expect you to still have the receipt or a record of your credit card transaction. The company must be realistic about what proof it asks for.
It’s a good idea to hold onto things which can be used as proof of ownership such as:
- receipts showing that you’ve paid for certain items
- photographs of your belongings,
- serial numbers of your television and other electronic goods
- an inventory of all of your DVDs, books, CDs etc
- certificates showing the value of your jewellery or artworks, done by a professional valuer
Your insurer can also tell you if you need to provide specific types of proof.
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My flatmate has contents insurance but I don’t – would my flatmate’s insurance cover my loss if we got burgled?
You’d have to check their insurance policy to be sure, but it’s likely that your flatmate’s insurance will only cover loss of their own property if the home you rent together is burgled.
Note that If you are a young person and your parents have comprehensive contents insurance it may cover your belongings even if you don’t live at home – it is well worth checking with them to be sure.