Homeowners face insurance shortfalls after earthquakes: Do you have enough cover?

16 February 2017

Growing concern about under-insured earthquake-damaged homes in the Kaikoura region is an acute reminder to check your house insurance policy to make sure you have enough cover.

“Some homeowners who suffered damage from the November earthquakes are under even more stress as they discover their insurance won’t cover the rebuild costs,” says Insurance & Financial Services Ombudsman, Karen Stevens. “Finding you are under-insured is very traumatic. It is timely to remind everyone to make sure you have enough cover. The big question you need to get right is whether the “sum insured” amount is enough to rebuild your home in the event of a disaster.”

The move to sum insured house insurance policies happened after the Canterbury earthquakes. It means most New Zealand insurers have shifted from covering the full cost of rebuilds in the event of an earthquake to new policies that will only pay out the sum you nominate. For example, if I think my house is worth $400,000 and I nominate that sum, that is the most an insurer will pay out in the event of a total loss claim after an earthquake - it will include demolition costs, professional fees and other costs you might not think of.

“It’s really important to understand what sum insured means,” says Karen. “The sum insured amount is not the current value of your house, but the total cost of rebuilding it.”

The IFSO Scheme recommends you seek advice about what the total rebuild cost might be, and to take time to do the following things:

1. Read your house insurance policy and check that the amount you are insuring your house for would be enough to rebuild it. 

2. Check that the square meterage of your house and other buildings on your property are recorded accurately.

3. Check that additional features of your house have been identified. This includes fences, driveways, garages, sleep-outs, sheds, retaining walls and swimming pools.

4. Answer the questions on your insurer’s online calculator.

5. If in doubt, ask a builder or quantity surveyor for their expert advice.

Remember, don't underestimate what it will cost to do a total rebuild of your house.

See our information sheet