Home and contents insurance common FAQ's
If you’ve just bought a house, getting insurance sorted comes with the territory. Even if you feel like you know insurance inside out, there are always new things to consider before making a decision on things like cover amounts, excess levels and who your insurer should be. Here we look to answer some commonly asked questions about Home and Contents insurance in New Zealand.
- When should I apply for home insurance?
This is the contract between you and your insurer. This hefty little number contains all the ins and outs (terms and conditions) of what you’re insured for and – perhaps even more importantly – what you’re not (these are known as ‘Exclusions’ – read on for an explanation of what that means).
- Does the cost of house insurance increase every year?
The cost of house insurance is driven by several factors such as: building material costs, inflation, market conditions and location of the home. We all know that building costs don’t stay the same year after year, so it’s logical that your house insurance premium will change over time. Your premium may also be affected by risks associated with the location and/or position of your house. Your premium may go up or down, depending on how the factors that affect your premium have changed since the last renewal of your cover. Your insurer should notify you of any change to your premium before your policy renews. If you have any questions about the new amount, you can call your insurer and ask why.
- How does excess work on home insurance?
An ‘excess’ is an agreed amount that you must contribute towards a claim for each event that occurs. For example, if you have an excess of $2000 and your home is destroyed, you are required to contribute $2000 towards the claim. If the value of your loss is higher than your total sum insured or any other policy limit, you may still need to pay your excess in addition to any uninsured amount.Some customers choose to adjust the amount of their excess as a way to control the cost of their insurance premium. You should be able to adjust your excess at any time, except while a claim is underway.
- Is it better to have a high or low excess?
The size of your excess should take into account your ability to contribute to a claim if you need to make one. Some customers accept a higher excess to minimise the cost of their insurance premiums, however a higher excess may mean that at claim time, they have to find a larger sum of money to pay the excess. With a smaller excess, the annual premium is likely to be higher, but the trade-off is that you won’t have to dig as deep into your own pocket at claim time.If you choose a higher excess, you could look to hold savings of an amount equal to that excess so that it’s always there in case it’s needed. However, not everyone is in a financial position to do this, so in the end, the excess you choose will need to suit your own circumstances.
- How much does a house insurance policy cost?
The cost of home insurance depends on a number of things, such as the age of the home, how much it would cost to rebuild, the area the house is located in and the type of cover you take out.So, when a friend says, ‘insurance costs about $XXX’, they are probably basing their information on the cost of insurance for their own house. For an accurate picture of how much your homeowners’ insurance will cost you, you need to ask for a quote based on the facts and figures related to your place.
- What documents do you need to get home insurance?
Before most insurers can provide a quote for home insurance, they need to know specific things about your home. You’ll probably be able to find some of the information required in the LIM report, which is commonly provided by the Real Estate Agent who marketed your property.
- What information is needed to insure a house built after 1935?
For a dwelling built after 1935, you’ll likely need information like what year the home was built, what it’s mostly built of, the floor area (including any outbuildings) and the home’s general condition. It’s also important to note any retaining walls on the property, any recreational features (such as swimming pools or tennis courts,) and how steep or flat the section is. The most important thing of all is to find out the likely rebuild cost of the home if it were to be destroyed. There’s a calculator to help with this.
- What information is needed to insure a pre-1935 house?
If your home was built before 1935, you’ll likely need all the info mentioned above, plus you’ll need to find out if the house’s been recently rewired, replumbed, reroofed, relined or re-piled. You will also need to disclose any outstanding maintenance issues or unrepaired damage. Finally, you will likely need to know if your home is classed as ‘historic’, or a ‘heritage building’ or located in a ‘special character’ area.
- Do I need homeowners insurance if my house is mortgage-free?
If your home is all paid for and you have discharged any associated mortgage, you won’t have a lender demanding you have house insurance. However, there’s always the risk that something will happen to your house. The risks can include anything from fire damage to your home, all the way to natural events such as a earthquakes and landslips, or completely unexpected events such as a vehicle crashing into part of your home. It’s important to know that EQC cover doesn’t apply if you’re uninsured. You also need to consider your liability as a property owner if you are responsible for damage to other people’s property.
- How much contents cover do I need?
The easy answer is ‘an amount that equals the value of your possessions’. Under-insuring your belongings is a risky business that could leave you severely out of pocket if you’re burgled or your possessions are destroyed in a fire.If you haven’t recently done a tally of how much you own and what it’s worth, we recommend bringing yourself up to date. Every year, most people add to their list of possessions and potentially give away or sell a few things as well. It’s a smart idea to review the value of your belongings once a year before your contents cover comes up for renewal.
Some policies have limits on certain items, such as bicycles or cameras. These items may need to be specified on your policy to ensure they are adequately covered.
- How can I reduce the cost of my home or contents insurance?
There are a few ways to reduce the cost of your house or contents insurance. You can:
- Review the sum insured for your home or contents as shown on your policy – it may be worth less than what you’re insured for.
- Review your eligibility for discounts –if you have all your insurance with the same insurer, you may be entitled to a multi-policy discount.
- Increase your excess amount (what you pay towards a claim).
- Remove additional cover choices from your policy.
- Reduce the level of cover you have.
It’s important to understand what changing your policy will mean for your level of protection, so it can be beneficial to talk it over first with a consultant.