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House insurance for beginners

12 September 2016

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 actually save you both time and money in the long run. 

1. Check out the policy benefits

2. Save yourself from potential financial ruin with legal liability

3. Work out 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’ve introduced Replacement Cover to give you greater peace of mind. In an event other than a natural disaster, we’ll use Replacement Cover to rebuild your home, even if it costs more than your Sum Insured. 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 with two or more polices. 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 when painting your home, you accidentally drop your paint tin on your neighbour’s car damaging it - the legal liability component of your policy would cover this accident. This is up to $2million 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 getting 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 without insurance? 

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 be false economy, especially when the cost for the right coverage may surprise you. For example, for every $100,000 an AA Insurance customer increases their Sum Insured, on average, there is a difference in their premium of around $40.

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 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, such as a builder, architect, quantity surveyor or other valuation expert.

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