Do you have adequate insurance to cover your home if anything goes wrong?
Are you due for your
2020 insurance policy review?
By: Bonnie Radcliffe, Feb 2020
Under-insurance is a prevalent issue in New Zealand, and while you might be aware that your cover isn’t quite up to scratch, you could be horrified to know just how far short your policy may fall.
New Zealand often experiences extraordinary conditions. Natural disasters in the form of earthquakes, floods and damaging storms have impacted parts of our country and can come with little warning.
Earthquake damage to homes is covered automatically as part of the Earthquake Commission (EQC). However, to qualify you must have private home or contents insurance.
Then there are the everyday items that we need to ensure we can go about our daily lives. An unforeseen travel glitch, the loss or damage of portable property such as a laptop, bike or car, unexpected illness or a sick pet can all quickly snowball into financial and emotional stress.
To help you navigate the world of insurance, we’ve created a checklist of things to keep in mind:
How much is enough?
Most of us are probably guilty of having no idea of the exact value of our home and its contents. A primary factor contributing to the under-insurance of Kiwis is our ‘set and forget mentality’; we organise our policies when we buy or move into our home, and then assume we’re adequately protected indefinitely.
Although some insurers still cover for a full replacement of our home no matter the cost, common practice in New Zealand is to let customers set their own level of insurance at a capped amount. This is known as ‘sum insured’ and should be the cost to completely rebuild you home. It will change yearly due to changing house and building prices, and will need to include features of your property such as pool or driveway.
While the building insurance covers the cost of repairing damage to the structure of your property, contents insurance covers the cost of replacing the belongings in your home if they are damaged, stolen or destroyed.
As our life circumstances and assets change, our insurance policies should change too. For example, building an extension to your house, renovating the kitchen, updating home furnishings, or buying new technologies should all prompt an insurance review.
How to choose?
There’s a multitude of policies on the market, and some will be more suitable for your needs than others. There are three common types of home and contents insurance available: fixed sum insured (the most common type), indemnity (present day value) and total replacement policies.
A sum insured policy can be a good option as it will cover you for an amount that you decide with your insurer and often includes all the fees involved. However, it is important that you always make sure you cover is up to date, and that all you check your policy regularly to see what may have changed year to year.
Protecting your home shouldn’t be your only insurance priority
Each policy will have a different set of terms, conditions and exclusions. Referring to the product disclosure statement (PDS) will help you to understand exactly what you’re covered for and what you’re not.
Though specific details of policies vary greatly, there are some common exclusions to be wary of. For example, typical exclusions for home insurance policies include: vacating your home for an extended time, existing damage, partaking in a home-swap, or failing to secure your property. Likewise, common travel exclusions are theft of unattended luggage, self-inflicted injury, or being under the influence of alcohol.
To further protect your valuable possessions, portable contents insurance offers a degree of cover for personal items that frequently leave your home with you, such as handbags, electronic devices, sunglasses and jewellery. Just like home and contents insurance, this type of insurance provides cover for theft, accidental loss or damage while you’re out and about.
Sudden changes to policies
Generally speaking, insurance premiums typically increase following natural disasters or a spike in specific claims, this was something that was seen with the Christchurch earthquakes. The more regularly you assess your insurance policy, the less likely you are to be caught out having inadequate coverage.
Don’t set and forget when it comes to your insurance. Changing life circumstances and variables affect the insurance you need. While setting time aside to review your cover may seem like a hassle, it’s a hassle worth committing to.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from an insurance or finance professional before implementing changes relating to your finances.