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The cheapest house insurance – is the cover really as good as the price?

Like most New Zealanders, your house is probably your castle and most valuable asset. So it makes sense you would want to protect it from potential damage and related costs. The obvious way to do this is by having an appropriate home insurance policy.

We know deciding on the right insurance for your circumstances can be a weighty decision. While a key driver can be cheap home insurance, there are some other important factors you should consider that may actually save you both time and money in the long run.

Other than price, what other factors should I consider?

We all like to make savings where we can; however, it’s safe to say that in most cases, you usually get what you pay for. The same can be said for home insurance, which is why we encourage you to consider all the relevant factors first, such as the amount you insure your home for, and the excess options. There are also ways you can reduce your premium without compromising on these important features. But let’s start with the basics.

The amount your home is insured for

This is an essential factor, particularly at claim time. This means getting the rebuild, or Sum Insured, value of your home right for your circumstances. 

If you need help deciding on the rebuild value of your home, try using our free Cordell Online Calculator. This tool goes through a number of sections relating to the rebuild of a typical New Zealand home and will give you an estimated guide as to how much it will cost to rebuild your own home. Alternatively, if your home isn’t considered typical, or is an architecturally designed home, then your most reliable source of advice would be a building expert.

Read more about Sum Insured.

Excess options

An excess is the amount you need to contribute to make a claim. There are different excess options available; depending on what you think is manageable for your budget should you need to make a claim. Generally, the larger the excess the smaller premium.

Before you decide on a larger excess though, you should work out if you can afford to pay for any smaller accidents around your home that may not be worth as much as your excess, such as a broken window, or a dent in the wall.

Many customers choose to increase their excess and reduce their premium because they are only worried about the big events, like a house fire, or a tree falling through the roof. They aren’t too concerned about claiming on the smaller things, as they can cover the cost of repair out of their own pocket. They may also have a good claims history, meaning they have made very few or no claims in the past, so don’t believe they are likely to make too many claims in the future.

It’s worth noting that your home insurance excess can be different from your contents insurance excess – it’s really up to you. You can also change your excess at any time. So if, after increasing your excess, you later decide to change it back, you have the option to do so.

How can I lower the cost of my house insurance premium?

There are a number of ways to help lower the cost of your home insurance. The first is to check that you are receiving any package discounts or other discounts e.g, AA Member discount that your insurer offers.

Following this, another way to reduce your premium without jeopardising your cover, is to increase your excess as mentioned above. For example, let’s say a 60-year-old homeowner is living mortgage free in Mount Albert, Auckland. An average 1950s, three bedroom brick home with a Sum Insured figure of $342,000, which means an annual premium with AA Insurance in 2015 of around $793, with a standard excess of $400. If they increased their excess to $1,000, the premium would be reduced by over $110 to around $680 per annum.

Why do I need home insurance?

While we encourage homeowners to protect their home by insuring it, it’s good to know what the possible consequences of not having home insurance are.

Accidents can and do happen, no matter how careful you are, such as a burst pipe, or kitchen fire. Your home insurance is designed to cover these types of incidents, so it can be repaired to the way it was prior to the accident. Without it, you would have to cover the repair out of your own pocket. Not to mention, you will have all the hassle of arranging the repairs.

This also applies to damage caused by acts of nature that are totally out of your control. Bad weather such as cyclones, hail, and flooding or earthquakes and landslips can all cause damage to a home, and to varying degrees. Without home insurance you would need to pay for repairs or replacement of your home out of your own pocket. You would also need to pay for any temporary accommodation if you have to move out during repairs. It’s worth remembering that in order to receive EQC cover you need to have a valid fire insurance policy in place at the time of the event.

Legal Liability

Then there’s the legal liability component of your home cover. Should you cause physical damage to another person’s property – for example if a tree on your property fell over and hit your neighbour’s garage, damaging it – the legal liability component of your policy would cover this accident. This is up to $2million for any one event with an AA Insurance policy.

Once again, without home cover, you would need to foot the bill out of your own pocket. With this in mind, it’s worth considering if you can afford not to have insurance.

Summary

Now that you know a little more about home insurance, take the time to carefully consider your options, including price, so you won't have any unexpected surprises come claim time. if you're still unsure about the details of your cover and the options available to you, then speak with your insurer directly and they will help you find the best insurance for your needs.

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