How Insurance Works
People need insurance for a number of reasons, but mainly because they want protection in the event something unexpected happens. Being prepared is a small step that provides protection for you and your family if the unexpected becomes a reality.
Hired e-scooters and bicycles
Unless otherwise covered by the terms and conditions of an e-scooter or hire bike company, riders will generally be covered for their legal liability under their contents insurance policy for accidental damage caused to another person’s property.
For AA Insurance customers, cover is up to:
- $2million for damage to other people’s property, including related legal costs and expenses incurred with AA Insurance’s consent
- If you damage someone else's property, then do the right thing and give them your contact details and let your insurer know.
- If you don't know who the owner is or how to contact them, you can report it to the police or leave a note with your details tucked under the windscreen wipers of the other person’s car.
- Look for witnesses, not only other riders/drivers but the person collecting trolleys, or even the busker outside the mall. If you’ve witnessed someone else damaging a parked car, or other property, do your bit and pass on any information you have to the innocent party.
- Talk to your insurer. If you know who did the damage, your insurer will contact them or their insurer to manage the claim. If you don’t know, then you’ll need to claim on your own insurance and pay an excess. Or if the damage is minor, cover the repair bill yourself.
- It’s worth knowing that whether you find the person responsible for the damage to your car or not, if you have comprehensive insurance your repairs will be covered.
Winter weather tips
Power cuts are generally unpredictable, caused by bad weather or an accident, and often at night. However, to get you through those dark spells here is a checklist of things you can do to keep you and your family safe before, during and after an outage.
Before a power cut
- Have a radio (for updates) and torches at the ready, and stock up on spare batteries for both. Keep your mobile charged and consider getting a spare battery, or power pack. Radio networks that work with Civil Defence to broadcast important information and advice during an emergency are: Radio NZ National, Newstalk ZB, The Hits, More FM and Radio Live.
- Blankets, wet weather clothing and strong shoes are also handy, especially if you need to leave your home. Use a torch instead of candles for safety. If you only have candles then be sure to supervise their use, place them in metal holders away from anything flammable and extinguish them properly when they are no longer needed, or when you go to bed. Do not leave them unattended when lit.
- Keep your BBQ gas bottle full so you can cook a hot meal or make a hot cuppa. Some fireplaces can be used as a hotplate, so keep a suitable vessel on hand to boil water or heat food. If you have a fireplace, get it cleaned and checked regularly.
- If you are medically dependent on power let your electricity provider know, and make sure your equipment has back up batteries or an appropriate generator.
- Consider a surge protector for your appliances that may be affected from power interruption such as the TV, stereo or computer.
- Be sure you know where to find all these items in an emergency, and in the dark. Better yet, store what you can together so you just need to go to one spot
- Know where to find your insurer’s contact details should you need them in an emergency. Re-evaluate your home and contents insurance policies every couple of years to ensure it provides the right kind of protection for your circumstances. For example, if a power outage causes you to lose the contents of your fridge and freezer will your insurer cover you?
- Move your car out of the garage if you rely on power to open the door.
During a power cut
- Check if your neighbours still have power and if the streetlights are on. If your home is the only one in the dark, there could be a switchboard problem, or a fuse has blown.
- If it looks like the neighbourhood has been affected then report the outage to your electricity provider. Check out their website or app on your mobile to stop overloading the phone lines
- In winter, close all the curtains, windows, and doors in your home to keep the heat in, even if the power cut happens during the day. Block any drafts with a draft stop or towels.
- Turn your appliances off at the wall in case of a power surge when the outage is fixed. Also turn off the elements on your stove, the kettle, and all heaters, so they don’t start up without you noticing when the power comes back on. Leave one light on, so you’ll know when the power is restored.
- Keep the fridge and freezer closed so your food will stay cold longer without power. Getthru.govt.nz suggests that if you have experienced a power cut and perishable food has been exposed to temperatures above 4⁰C for more than two hours then throw it out.
- Fill the kettle and any other water bottles as soon as the power turns off, in case your water supply is affected too.
- Have a selection of board games and puzzles to keep the kids amused.
- Stay home unless you need to, as streetlights and traffic lights may also be out. And stay at least eight metres away from damaged power lines and electrical equipment.
- If you are medically dependent on power, you should let your electricity provider know your circumstances before a power outage occurs. In the event of a power cut, you can then activate your back up plan, such using a generator or batteries and calling your provider for an update, or asking family and friends with power for their help. If you have no other support plans or feel unwell go to your nearest hospital or for urgent medical attention then call 111.
Once the power is restored
- You can plug your appliances back in – gethru.govt.nz suggests waiting 10-15 minutes first, just in case the power cuts again.
- Check your fridge and freezer for perishable food – if it’s been exposed to temperatures above 4⁰C for more than two hours, then you should throw it out. Take extra care with perishable food such as meat, poultry, seafood, fresh pasta, fresh greens, dairy, eggs, soy meat substitutes and leftovers. Check your insurance policy, as your insurer may cover this – take a photo of the items to help with your claim.
- Check your switchboard to make sure it’s all in order and no fuses have blown.
- Reset clocks and alarms, restock things you’ve used, such as batteries and gas bottle, and recharge items like your mobile phone
- Check out getthru.govt.nz for more information including how to prepare your own emergency and getaway kits to help you get through another event
- Unless your windows are in direct sunlight, keep your drapes and blinds closed to hold the heat in your home.
- Don’t place heaters in areas with restricted airflow because they may over heat. It’s also important that high wattage appliances like heaters don’t overload power points or multi-boards, as they may cause a fire.
- Remember the heater-metre rule – always keep furniture, curtains, clothes, and children and pets at least one metre away from heaters and fireplaces. Never cover your heaters or store items on them.
- In susceptible regions of the country, snow straps on guttering will help support them if there’s a heavy fall.
- Outside, disconnect and drain garden hoses to prevent icy water leaking onto paths or into a soggy garden. Empty birdbaths and fountains too.
- Avoid slippery paths and steps by spraying an ice and water repellent solution on before they freeze. You can also use sand, clay-based kitty litter or rock salt on your paths and driveway, but be aware salt can damage grass and plants.
- If you are leaving your holiday home, turn the water off and clear the pipes so they’re water free. This will avoid the pipes bursting when any frozen water inside defrosts.
- If you can’t unlock your car door, don’t try to force the handles, as they can easily snap. Instead, try using a de-icer or hot tap water on your locks – but only do this occasionally, to protect your locks.
- You can also use a de-icer or hot tap water along the edges of the door seals if they are frozen to the metal frame.
- Turn off all accessories before trying to start your car, to prevent draining battery power. When it’s running fine, turn on the heater to clear ice from the glass and mirrors.
- Don’t pour boiling water over your windscreen as this may cause cracking. The best way to remove ice from glass is a good quality plastic ice scraper, or a chemical de-icer. Covering the windscreen will prevent it icing up in the first place, but make sure it isn’t wet, or made of a fabric that may leave behind fibres.
- Move your outdoor furniture inside or secure it before bad weather strikes – this includes tying down your trampoline
- Check fences to ensure they can withstand high winds – wooden fences can rot over time and sometimes require maintenance and reinforcement
- Ensure you have guttering that is maintained and kept clear from leaves and debris so it is able to handle heavy rain
- Prune trees to avoid broken or weakened limbs breaking or damaging cars and windows
- Make sure you, your family and pets are safe and in a dry, warm area
- Pull curtains and drapes over windows to prevent injury from shattered or flying glass
- During a power outage turn off appliances at the wall to prevent them a power surge from damaging them – you can leave a light on so you’ll know when the power is returned
- Move your car out of your garage, and open your gate, if you require power to operate them. If the power goes out, you could be stranded
- Do not attempt to repair any damage until it is safe to do so
- If it’s safe, place a tarpaulin over any areas where the roof is leaking
- Don’t drive unless you absolutely need to, especially if there is a power outage as traffic lights aren’t likely to be working.
- If your vehicle has been damaged or suffered flooding it may be unsafe to drive
- Keep your damaged items if you can or take photos – this is useful to confirm what needs replacing
- Call your insurance company as soon as possible to report any damage to your property, especially if you need emergency repairs e.g. broken roof and windows are exposing your home to the elements or potential intruders
With the cold snap hitting the country, AA Insurance has a few winter tips to help you look after your home and contents.
Tips to help you through a storm
- Secure or move your outdoor furniture inside - tie down your trampoline as well as any other large objects like BBQs and garden furniture, or put them in the garage
- Unplug appliances that may be affected by electrical power surges - if power is lost unplug major appliances
- Pull curtains and drapes over windows to prevent injury from shattered or flying glass
- Keep clear of broken windows or roofs
- Do not attempt to repair any damage until it is safe to do so
- If there is water in your light fittings, turn your lights off and call an electrician immediately
- If it is safe to do so, place a tarpaulin over any areas where the roof is leaking
- If the floors are wet, lift your furniture off the floor to prevent staining
Tips to help you through snowfall
- Snow straps on guttering will help support them if there’s a heavy fall
- Unless your windows are in direct sunlight, keep your drapes and blinds closed to hold the heat in your home
- Remember the heater-metre rule – always keep furniture, curtains, clothes and children at least one metre away from heaters and fireplaces. Never cover your heaters or store items on them
- It’s also important that high wattage appliances like heaters don’t overload powerpoints or multi-boards, as they may cause a fire
- Make sure you, your family and pets are safe first. Whether you’re a homeowner or renter, there’s no rush to make a claim for your home or contents. So, just get in touch with us when you’re ready to make a claim – but remember, the sooner you do, the sooner we can help
- If you need urgent repairs to make your home safe e.g. there’s a hole in your roof or a smashed window is letting in rain, or if you need temporary accommodation then call us on 0800 500 216.
When assessing damage:
- Do not attempt to inspect or repair any damage until it’s safe to do so – this includes entering flooded homes before they have been declared safe by local authorities
- Be careful cleaning up or dealing with items that may have been contaminated by flood waters – wear sturdy footwear, and if you have a cut or open skin that makes contact with water then ensure you clean it carefully, and check you’ve had a recent tetanus vaccination
- Be aware of potential electrical damage – if you are unsure, turn off the main power or call an electrician
- If your vehicle has been damaged or suffered flooding it may be unsafe to drive.
When cleaning up:
- Keep you damaged items if they are safe to do so, or take photos – this is useful to confirm what needs replacing. If you’re a tenant, let you landlord know so they access the damage to their property
- Cooking utensils that have made contact with flood waters should be thoroughly disinfected and porous items like wooden utensils, baby bottles and dummies replaced
- Throw away rotting or tainted food, including that which has made contact with contaminated water, or any tinned food that has been damaged
- Check with authorities on the safety of your drinking water – you may need to boil or purify it before use. If it’s in short supply, keep some in a bowl with disinfectant to wash your hands
- For more information visit getthru.govt.nz.
Understanding Sum Sure
Home insurance is based on the reconstruction cost of your home. This is called your Sum Insured and it’s the maximum your insurer will pay to rebuild your home in the event of a natural disaster.
There are two main ways that you can calculate your sum Insured. The first is by using a free online calculation tool for standard homes. Or, if your home isn’t considered standard, you should consider consulting a builder, architect, quantity surveyor or other valuation expert to provide an estimated rebuild cost.
Up until August 2017 AA Insurance provided the free Cordell Online Calculator on this website. The calculator required customers to input the details of their home such as its size, number of storeys and construction materials. It would then use this information to provide an estimated typical building replacement cost for a standard residential home.
We appreciated that some customers were having difficulty calculating an accurate sum insured using this tool, which took considerable time and often left them uncertain the amount they calculated was enough.
So we made the move to Cordell Sum Sure, the next generation of free online calculator that provides an automated reconstruction cost estimate for a customer in less than five minutes. The Sum Sure calculator takes a lot of the guesswork, and time, away from working out your home’s sum insured by pre-filling your property’s key attributes for you.
Cordell, a CoreLogic Business, is a leading provider of building cost information in both New Zealand and Australia. AA Insurance is believed to be one of the first businesses in New Zealand to offer Cordell Sum Sure to its customers.
In most cases, all you need to provide is your property’s address in order to get a fact-based estimate. After receiving your address, the calculator automatically populates the rest of the information it needs about your home. Once you’ve checked this information is correct, or updated it, the calculator generates an estimated reconstruction cost for your home, including an allowance for professional fees, demolition, removal of debris and GST.
No, the purchase price of your home only gives you the cost that the market values your home at on the day, including the land that’s not covered by your home insurance, not how much it would cost to rebuild. It also does not include things like the cost of demolition and removal of debris of a damaged home, or the professional fees and building costs, including GST, to rebuild a home. Nor does it consider the costs related to current building codes like modern foundations, insulation and plumbing that may not have applied when your home was initially built.
Sum Sure considers all these costs and its database is constantly updated to reflect current pricing for things like materials, labour, overheads and profits.
Yes, in an event other than a natural disaster, AA Insurance may settle your claim using Replacement Cover, which means we’ll pay for the costs of the repairs to, or rebuild of, your home even if it’s more than the sum insured. We apply Replacement Cover to all home policies automatically. All you need to do is take reasonable steps to give us an accurate size for your home (like using a LIM report or other council authorised documents) and calculate an accurate sum insured (by using Sum Sure or a qualified professional).
For most standard properties in New Zealand, Cordell Sum Sure will give a fast, fact based estimate for your home. You will still need to check all the prefilled attributes of your home are correct, as some things may have changed like a recent room addition that’s yet to be recorded.
If your home isn’t standard – it may be architecturally built, very large, of high value, or has unusual or special features – then you may want to consult a building professional to help estimate an accurate reconstruction cost for you.
Top 5 contents insurance mistakes
People remember the obvious things – phones, TVs, computers – but forget the more obscure – cutlery, bedding, towels, clothing – when they are estimating the sum insured amount for their contents cover. If you suffer a total loss, like in a house fire, you may need to replace all your belongings - not just the things you think could be lost or stolen - and it can add up to more than expected.
Forgetting to specify things like jewellery or expensive bicycles or cameras is more common than you’d think. While these items will still be insured if they are lost, stolen or damaged, the amount of cover will be up to the event limit set by your insurer, unless they are noted separately on your policy schedule. Check your policy for the limits and items you need to tell your insurer about. Instead of specifying individual items, AAI has made it easier by asking customers to select an amount that covers all their high value items; otherwise the event limits apply.
It’s important to keep an adequate record of your possessions, so if you need to make a contents claim, you have something to back it up. Some clear, close-up photos of your belongings is a great and easy way to do this – walk around your house with your smart phone, and you can have it done in under half an hour. Upload these images to your email so you will always have a copy even if you lose your phone. Do try and keep relevant receipts also, and remember to keep them at another site, such as at work, or with your family for safe keeping. It’s a good idea to photograph receipts too, as sometimes the print fades.
It’s all too easy to buy a contents insurance policy then forget about it. But if you’ve purchased anything significant, maybe a big piece of sports gear, dining table, or a new TV, it’s a good time to check whether you need to update the sum insured amount for your contents policy. Most insurers offer an online contents calculator to help with this. And don’t forget that outdoor furniture, like the new lounge suite on the deck, or a gift such as expensive jewellery.
There are a lot of different insurance policies around, so it’s really important to read the policy so you understand what it covers, and what it doesn’t. Unfortunately, there are a few people who are disappointed when they need to make a claim, because they thought they had different cover than the policy specifies. A couple of exclusions or limits that often come as a surprise, yet are clearly outlined in your policy, are gradual damage, intentional damage, and no cover for those items that have been permanently removed from the home (ie gear you’ve stored in your friend’s garage).
Conversely there are often some surprises for what is covered, such as your legal liability for accidentally breaking something in a store or, if you’re an AAI customer, your child at boarding school accidentally causing damage to where they are staying.
If there is anything you’re not sure about, or are particularly concerned about, then talk to your insurer - that’s what they’re there for.
What is insurance and how does it work?
People need insurance for a number of reasons, but mainly because they want protection in the event something unexpected happens. The protection offered by our home, contents and vehicle policies can cover the replacement or repair of our customers’ belongings that they may not be able to afford themselves e.g. a kitchen fire, or the cost of the damage caused by others’ actions, such as rear-ending another vehicle. Without insurance people would need to pay for the damage themselves. They can manage the risk of loss or damage to their property by purchasing insurance, and let the experts take care of everything in exchange for an insurance premium.
It’s a common assumption that the money a customer pays for their premium is ‘kept aside in a separate box’ for when they make a claim. In reality, this money is pooled with all the other premiums and goes to pay off other peoples’ claims and cover the other costs of running the business. One in three of our customers made a claim last year, which was paid out of the pool of money. On average, a customer makes a claim on their insurance once every eight years.
The most common claims for vehicles include collisions or theft. For contents claims it generally involves lost or accidentally damaged hearing aids, dentures, reading glasses and mobile phones, while home claims most often involve damage caused by fire, electrical incidents and weather.
Reinsurers are the companies that insure the insurance companies. There are also companies that insure the reinsurers. Most are based overseas.
Each year we expect to receive a certain number of sizable claims and plan accordingly. This is the norm and our calculations help predict this. However, reinsurance protects against things that aren’t the norm, such as earthquakes and floods that are infrequent yet can be huge in terms of financial cost.
In addition to your insurance premium, you will notice that there are several levies such as those for EQC, the Fire Service and GST included in your invoice. They are additional to your insurance premium and your insurer is legally required to collect these amounts from you on behalf of government agencies
It’s worth noting that your insurer does not insure your land. Unlike other countries, residential land in New Zealand is covered by the Earthquake Commission, for occurrences such as landslips, and earthquakes. The EQC provides cover for the land on which your home is built, as well as a portion of the cost of your home.
If you have contents insurance, the EQC also provides cover for a portion of your contents.
The EQC provides cover up to $100,000 (+ GST) for your home, cover for your insured residential land up to an 8m perimeter around your home, and up to $20,000 (+ GST) for your contents.
This is only a very brief summary of how EQC cover works. Further information is available on the EQC website.
An excess is the amount you must pay towards a claim for each event that occurs and is covered by your policy. You would have had a choice of the excess you would like to pay at the time you took out your policy. The amount of excess you choose for your policy is a way to help lower your premium - the higher your excess, the cheaper your premium.
Understanding insurance fraud
Types of insurance fraud are as diverse as the people who commit them, and occur in all areas of insurance. They can range fromslightly exaggerated claims, to over-insuring the value of property, to deliberate accidents or damage. However the most common form is inflating the cost of a loss.
According to the Insurance Council of New Zealand, insurance fraud is estimated to cost up to $450 million each year. While the vast majority of customers are honest, and are treated as such, some customers commit fraud intentionally - the chief motivation being financial gain.
A generally honest person may unintentionally commit fraud, not realising that by exaggerating their claim that they are acting dishonestly. It doesn’t matter whether they are claiming for non-existent goods, inflating the price of goods, or adding in a few extra items into the claim. Fraud is fraud, no matter the size.
In one example, a customer made a claim for a stolen diamond bracelet that had recently been specified on their contents policy. After further investigation the customer acknowledged that the bracelet had never existed, and as a consequence their policy was cancelled.
Insurance companies provide cover for their customers in utmost good faith. If a customer submits false information when they take out a policy, or at the time of a claim, this is considered a serious breach of contract with their insurer. Their whole policy may then bedeclined, even the parts of the claim that aren’t fraudulent.
While the number of these types of claims that are declined each year is very small, the consequences for those people can be significant.
An insurer may go so far as to cancel each of the customer’s policies, which can make it difficult for them to gain insurance elsewhere. If a claim is declined then a customer will also have their name added to the Insurance Claims Register (with a specific alert for fraud) or, depending on the extent of the fraud, a customer may find themselves with a criminal record, which can also make it difficult for them to take out insurance in the future, and with it their ability purchase a high value asset such as a house, as banks require insurance as a condition of a mortgage.
Most insurers do not refuse to insure people simply because they have had a policy declined or cancelled. Every circumstance is different so the insurer will try to find out exactly what happened and make a decision based on that individual, not on an arbitrary basis. There are many situations in which an insurer is able to offer the person insurance.
Insurance companies approach every claim assuming that their customers are being completely honest. It is regular practice for every insurer to look further into some claims to help clarify details and quantify costs. This can help us better understand what has happened and the types and costs of the property that is being claimed for. This enables us to help our customers get their claim sorted faster.
However, on rare occasions, if a fraudulent claim is suspected, this will require further enquiry by a specialist fraud investigator. If a claim is found to be fraudulent, it will not be accepted and further legal steps may be taken.
In one example, a customer made a claim within weeks of taking out a vehicle policy. Over the course of the next 12 months he made four other claims for cars he had written off, and was about to make a fifth. After further investigation it was discovered the customer had a record of fraudulent activity that he failed to disclose, and committed these offences under a significant number of aliases. His policy was subsequently terminated, and the thousands of dollars that had paid out in claims were recovered.
Every cent paid out against fraudulent claims, like the example above, would impact on the cost of our customers’ premiums, making insurance unaffordable for many if the fraud wasn’t identified.
Insurance in New Zealand
Comprehensive car insurance covers the cost of damage to your vehicle, plus the cost of damaging other people’s cars and property. Many drivers take out Third Party vehicle insurance, as it is more affordable than Comprehensive insurance. Third Party insurance does not cover damage to your vehicle, but does cover the cost of damaging other people’s cars and property.
The high uptake of vehicle insurance in New Zealand is also related to affordability. The number of Kiwis with some form of vehicle insurance is comparable to those countries with compulsory insurance. It can be attributed to low standard excesses when making a claim, and the fact that personal injury is covered by ACC rather than by insurance companies, which helps make insurance more affordable. Other countries generally include a personal injury component within their insurance policy, which means higher premiums for customers.
Most New Zealand insurers offer home insurance based on, and limited to, a Sum Insured. The Sum Insured is the maximum an insurer will spend to reinstate a customer’s home in the event of a claim.
Corporate Communications Specialist, AA Insurance
Account Manager, Botica Butler Raudon Public Relations