For most New Zealanders, their home is their largest asset and their most significant purchase. House insurance protects that investment, but many homeowners do not fully understand what they are covered for until they need to make a claim.
This guide covers the essentials of house insurance in New Zealand.
What House Insurance Covers
Standard house insurance covers your home and other structures on your property against sudden and accidental damage. This typically includes fire and smoke damage, storm and weather events, earthquakes, floods (though sometimes limited or excluded), burglary and vandalism, accidental damage (water damage from burst pipes, for example), and natural disasters covered under EQC.
What counts as "your home" usually includes the main dwelling, attached garages and decks, fixed floor coverings, and built-in fixtures like kitchen cabinets and bathroom fittings. Separate structures like sheds, fences, and swimming pools may be covered under the main policy or require separate cover.
Contents insurance is separate from house insurance. Your furniture, appliances, clothing, and personal items need their own policy.
Sum Insured, Full Replacement, and Indemnity Cover
This is the most important concept in house insurance and one that many homeowners get wrong. There are three main types of cover.
Under a "sum insured" policy, your insurer pays up to a specified amount to repair or rebuild your home. If your sum insured is $500,000 but rebuilding actually costs $600,000, you pay the $100,000 difference yourself.
Under a "full replacement" policy (increasingly rare), the insurer pays whatever it costs to rebuild to the same standard, without a cap.
Under an "indemnity" policy, the insurer pays to restore your home to its pre-loss condition, accounting for depreciation and wear. This means older homes receive less than new replacement cost. For example, if your 30-year-old roof is damaged, an indemnity policy pays for a 30-year-old roof equivalent, not a brand new roof. Indemnity policies are generally less expensive but provide less comprehensive cover.
Most New Zealand insurers now offer sum insured policies, which means getting your sum insured right is crucial. Underinsurance is common and dangerous.
Calculating Your Sum Insured
Your sum insured should be enough to completely demolish and rebuild your home to its current standard, including professional fees (architects, engineers), council consent costs, demolition and debris removal, temporary accommodation during rebuild, inflation during the build period, and any site difficulties (sloping section, difficult access).
This is almost always more than your home's market value or CV. Market value reflects land plus building in current condition. Sum insured is about rebuilding from scratch.
Insurance companies and some building industry websites offer calculators to estimate rebuild costs. These provide a starting point, but complex or unusual homes may need a professional valuation.
A common rule of thumb suggests $3,000-4,500 per square metre for standard construction in 2025, but this varies significantly by location, design, and materials. A simple 150sqm home might cost $450,000-675,000 to rebuild. Add professional fees, demolition, and contingencies, and the sum insured might need to be $550,000-850,000 or more.
Review your sum insured annually. Construction costs have risen significantly in recent years, and a sum insured that was adequate five years ago may now leave you underinsured.
Natural Disaster Cover and EQC
The Earthquake Commission (EQC) provides first-loss cover for residential property damage from earthquakes, volcanic eruption, hydrothermal activity, tsunamis, and natural landslips.
EQC covers the first $300,000 plus GST of damage to your home (dwelling cap) and the first $20,000 plus GST for contents. Your private insurance covers anything above these amounts.
To be eligible for EQC cover, you must have private house insurance. EQC cover is automatically included through your insurer, funded by a levy included in your premium.
Flood damage has traditionally been covered by private insurers, not EQC, though government proposals may change this. Check your policy for any flood exclusions or limitations, particularly if you are in a known flood zone.
Exclusions and Limitations
Every policy has exclusions. Common ones to watch for include gradual damage (slow water leaks, rot developing over time), wear and tear and lack of maintenance, pre-existing damage you knew about, certain types of land damage (subsidence, erosion), and some natural events in high-risk areas.
Flood exclusions or sub-limits apply to some properties. If your home is in a flood-prone area, your insurer may exclude flood cover entirely, apply a lower cap, or charge a significant premium loading.
Earthquake excess can be substantial. While standard excess might be $500-1000, earthquake excess is often 1-5% of sum insured. On a $600,000 policy, that could be $6,000-30,000.
Making a Claim
If you need to make a claim, certain steps help ensure a smooth process.
Document the damage immediately with photos and video before any cleanup. Make temporary repairs to prevent further damage (your policy covers reasonable costs), but do not start permanent repairs until the insurer assesses the situation.
Contact your insurer promptly. Most policies require notification within a reasonable timeframe. Keep records of all communications.
Get quotes for repairs only if asked. Some insurers want to assess damage themselves or use their own preferred repairers. Others want you to obtain quotes.
Understand the claims process. For major claims, the insurer will send an assessor. They may appoint a loss adjuster for complex situations. The process can take time, especially after widespread events affecting many properties.
Know your excess. You pay the excess amount before insurance kicks in. Keep this money accessible.
Choosing an Insurer
Price matters, but it should not be the only consideration when choosing house insurance.
Policy wording varies between insurers. Some are more generous in certain areas. Reading the policy documents (or at least the key features summary) helps you understand what you are actually buying.
Claims service reputation is worth investigating. Industry surveys and consumer reviews provide some insight into how insurers perform when you actually need them.
Financial strength matters. A company needs to be able to pay claims. The major insurers in New Zealand are generally well-capitalised, but it is worth checking ratings for smaller providers.
Bundling policies (house, contents, car) with one insurer often attracts discounts and simplifies administration.
Reducing Premiums
Several factors affect your premium, some within your control.
Higher excess means lower premiums. If you can afford a larger excess, you may save on annual costs. But ensure you can actually pay the excess if needed.
Security features like alarms, deadlocks, and smoke detectors can attract discounts with some insurers.
Claims history affects future premiums. Multiple claims may increase costs or affect your ability to get cover.
Location matters significantly. High-risk areas (flood zones, earthquake-prone regions, coastal erosion areas) face higher premiums or restricted cover.
No-claims bonuses accumulate with some insurers, reducing premiums over time if you do not claim.
When You Need to Update Your Policy
Notify your insurer when circumstances change. This includes renovations or additions that increase the rebuild cost, changes to occupation (someone starts working from home commercially, you rent out rooms), installation of new features like pools or spas, and extended vacancy (most policies limit cover if the home is unoccupied for extended periods).
Failing to notify changes can affect your cover. If the insurer would have charged more or declined cover had they known, your claim may be reduced or rejected.
Review your cover annually even if nothing obvious has changed. Construction costs rise, and your sum insured may need adjustment.
Protection Only Works If Done Right
House insurance is essential protection for your largest asset. But the protection only works if you are properly covered. Get your sum insured right, understand what is excluded, and review your policy regularly.
The cheapest policy is not necessarily the best value if it leaves you underinsured or with unexpected exclusions when you need to claim.
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