House insurance explained

Like most Kiwis, your home is probably your castle and your 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.

While a key driver can be cheap home insurance, there are three other important factors to consider that may save you both time and money in the long run:

1. The policy benefits

2. The legal liability component of your cover

3. Your sum insured

1. Policy benefits

Let’s start with the benefits of having home insurance at all. It’s designed to give you peace of mind should something happen to your home, because even if you’re really careful you can’t control the outcome of extreme weather, thieves or if someone causes a fire. Home insurance gives you cover for the big events such as fires and floods, burglary and vandalism, as well as the smaller accidents like broken windows and a burst pipe. Without insurance you would need to pay for the repairs or replacement of your home out of your own pocket, including any temporary accommodation should you need to move out during repairs. This leads us to specific policy benefits. At AA Insurance, we understand that it can be difficult to calculate the exact cost of rebuilding your home. To give you greater peace of mind, we offer replacement cover, which you may qualify for if you’re one of our customers and your claim is for anything other than a natural disaster. Replacement cover allows the full repair, rebuilding or replacement of the damaged portion of your home to the reinstatement condition, regardless of the sum insured, provided you’ve taken steps to set an accurate sum insured and size of your home.

You may also want your home insurance to include temporary accommodation for you and the people you live with should you need to move out during repairs. Then there are optional benefits that may save you money in the long run, like Excess Free Glass Cover, because we know things like windows are often damaged. It’s also worth checking for any discounts. Sometimes, the more insurance policies you have with one insurer, the more discounts you may be able to accumulate, such as AA Insurance's Multi Policy Discount for customers who have more than one eligible policy. Having your policies with the one insurer can also make claim time less stressful, and if it’s for the one event you may only need to pay one excess.

2. Legal liability

Then there’s the legal liability component of your home cover. So, if you accidently cause damage to another person’s property—for example, if a fire accidentally starts while you’re cooking dinner, and spreads to your neighbour’s house—the legal liability component of your policy would cover this accident. This is up to $2 million for any one event with our Home Insurance policy, although may differ with other insurers. Once again, without home cover, you would need to foot the bill out of your own pocket.

3. The amount your home is insured for

The amount your home is insured for is an essential factor, particularly at claim time. In the event of a natural disaster, we'll use your sum insured to repair or rebuild your home. This means it’s important to get the sum insured or rebuild value of your home right for your circumstances. Imagine if your home was razed to the ground, but when it came to time to rebuild you discovered the amount you insured it for fell short by $100,000. This could be the difference between a two and three bedroom home, or having the deck and garage added. Would you be able to find the extra money to complete your home? No doubt this would add more stress to an already stressful situation, so it pays to make sure your sum insured value is adequate enough to cover the rebuild of your home to get your home back to its original state. As you can see from the example above, if you under-insure your home to help keep the premium down, this can actually create a false economy. We often see customers pleasantly surprised at what the additional cost is for the right amount of coverage. Even in an event other than a natural disaster, to receive AA Insurance's Replacement Cover at claim time, you need to have taken reasonable steps to provide us with the accurate size of your home and calculated an accurate sum insured, prior to the loss. 

If you need help deciding on the rebuild value of your home, try using the free Cordell Online Calculator. This takes you through a number of different sections relating to the rebuild of a typical New Zealand home. After answering questions about your home, it will give you an estimated guide as to how much it will cost to rebuild. 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, such as a builder, architect, quantity surveyor or other valuation expert.