What does house insurance cover?

House insurance, aka home insurance, is designed to protect the structures on your property – your house, plus other things like the garage and fences. House insurance also covers swimming pools and built-in spa pools. It’s important not to confuse house insurance with contents insurance, which looks after all the belongings in your home and garage.

As far as unfortunate events go, house insurance helps you to get your place fixed or rebuilt if it’s damaged or destroyed by extreme weather, fire, and natural disasters like earthquakes, tsunamis and volcanic eruptions. It also includes cover for smaller disasters caused by burglars, graffiti vandals, falling trees, crashing cars and the kid-next-door’s football. And if a pipe bursts inside your home causing water damage, you’re probably covered. You can also get house insurance policies that offer ‘keys and locks cover’ that pays to change your locks if your keys are lost or stolen. As icing on the top, some insurers will pay for your accommodation during repairs or rebuilding.

There’s one more thing that your house insurance will cover and it’s a biggie. Legal liability. This type of cover refers to the costs you could incur if you accidentally damage someone else’s property or injure somebody and the cause is related to your home. For example, if you have a house fire that also damages surrounding properties, legal liability cover can come to the rescue.

To get the clearest picture of what a house insurance policy covers, it’s best to talk directly to an insurance company or insurance adviser.

If you don’t have house insurance, there’s a good chance your finances will take a major hit if your home burns down or is swamped by a flooding event. Even a smaller disaster, like a burst dishwasher hose, can put a dent in your savings.

What are the different types of house insurance?

Most insurers in New Zealand provide fixed sum insurance, which means you and your insurer will agree on the amount your house is insured for (the ‘sum insured’). So if your home is insured for $450,000 and it burns down, your insurer will pay up to $450,000 to rebuild it.

What if rebuilding costs exceed your sum insured?

Things get tricky if rebuilding costs more than your sum insured, which is why you can’t pluck a figure out of thin air. The sum insured should be determined by the realistic and up-to-date cost to totally rebuild your home, including demolition, architect fees, council costs and other build-related costs. Your sum insured should be reviewed annually, because construction and materials costs are continually going up.

Can you choose a higher sum insured?

Interestingly, you have the option of choosing a higher sum insured than the number suggested by the insurer’s online calculator. It means you’ll pay a higher premium, but it might still be affordable. Some people choose a higher sum insured for extra peace of mind.

Basic or comprehensive house insurance?

You’ll notice that most insurers offer a choice of a basic or comprehensive policy. A basic policy will generally cover damage to your home and legal liability. A comprehensive policy will offer extra cover benefits, like alternative accommodation, gradual damage from leaking water, landscape restoration, and keys and locks cover. The extras in a comprehensive house insurance policy usually have a cover limit. Always check the policy wording carefully before you agree to buy a policy.

What about EQC?

In New Zealand we have EQCover – the government’s natural disaster insurance scheme. You automatically get EQCover for your home and land if you have house insurance – a levy for EQCover is included in your premium. If your property is damaged or destroyed by a natural event (earthquake, natural landslip, volcanic eruption, hydrothermal activity or tsunami), EQCover provides up to $300,000 plus GST for a house and the land immediately surrounding. Then your regular insurance picks up the rest (up to your cover limits).

What sort of excess comes with house insurance?

An excess is the amount you will contribute to a claim. For example, if your excess is $400 and a tree damages your home causing $3000 worth of damage, you’ll pay $400 and the insurer will pay $2600. Choosing a higher excess is a way to reduce the cost of your cover. With some comprehensive policies the excess is automatically lower for a broken glass event. Even if your agreed excess is $400, you might only have to contribute $250 towards a broken window claim.

DISCLAIMER: The information contained in this article is general in nature. While facts have been checked, the article does not constitute an insurance advice service. It is only intended to provide education about the New Zealand insurances sector. Nothing in this article constitutes a recommendation that any type of insurance cover is suitable for any specific person. We cannot assess anything about your personal circumstances, all of which are unique to you. Before making insurance decisions, we recommend you seek assistance from an insurance adviser or expert.

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