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Most Kiwis Are Underinsured

Home insurance Auckland

Are you insured for what it would cost to rebuild?

Most homes are underinsured. Building costs have jumped, but the number on your policy may not have kept up. If something happens and your cover falls short, you pay the difference out of pocket.

We check your rebuild figure against current construction costs and read the policy wording so you do not have to. Your cover should keep pace with what builders charge today, not what they charged three years ago. Every policy includes your Natural Hazards Commission levy. Every client gets a free review at renewal.

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Well-maintained New Zealand suburban weatherboard home with native garden and corrugated iron roof

What is home insurance?

Home insurance protects the physical structure of your house against damage from insured events. That includes the dwelling itself, plus permanent fixtures and fittings: fixed floor coverings, built-in cabinetry, driveways, fences, retaining walls, and other structures fixed to the land. It is separate from contents insurance, which covers furniture, appliances, and personal belongings inside the home. Most homeowners need both.

Every policy works on a "sum insured" basis. You nominate the maximum your insurer will pay to rebuild if your house suffers a total loss. Getting this figure right is critical, and it is one of the main reasons homeowners choose to work with a broker. Got a mortgage? Your lender will require home insurance for the full rebuild value. Even without a mortgage, shouldering the entire rebuild cost yourself after an earthquake or flood is a risk most homeowners cannot afford to take.

Policies are underwritten by established insurers with the financial capacity to pay claims even after large-scale events. Canterbury and Cyclone Gabrielle proved that. Whether your property is a standard suburban house, a lifestyle block, or a multi-unit dwelling, the right policy makes sure your home is covered for what it would cost to rebuild today.

Coverage

What does home insurance cover?

Standard policies cover a broad range of events. Exact inclusions depend on your insurer and the tier of cover you choose.

Fire and smoke damage

A house fire can mean a total loss. Policies typically cover rebuild costs up to your sum insured, including damage from smoke, heat, and water used in firefighting. Does not matter whether the fire starts inside your house or spreads from next door. Fire cover is standard.

Natural hazards and disaster

If you own a home in Wellington or Christchurch, you already know why this matters. But it applies everywhere. Home insurance policies typically protect against earthquake, volcanic eruption, hydrothermal activity, tsunami, landslide, and natural landslip. The Natural Hazards Commission (Toka Tu Ake) levy is built into your premium and provides a first layer of cover, with your private insurer covering the balance up to your sum insured.

Storm and flood damage

High winds, hail, storms, and flooding can hammer your roof, glass, cladding, and the structure underneath. Policies typically cover repair or rebuild costs, plus debris removal and site clearance. Worth noting: some policies cap flood cover in high-risk areas. We check for those sub-limits and flag them before you commit.

Theft and burglary

If your house is damaged during a break-in, home insurance typically covers the repair cost for doors, windows, broken glass, locks, and walls. Many policies also include lock replacement and new house keys after a burglary, so your home stays secure. Stolen belongings are claimed under your contents insurance policy.

Accidental damage

Burst pipe floods your kitchen. Tree lands on your roof. Car reverses into your fence. Accidental damage cover applies to sudden, unintended events like these. It is one of the most commonly claimed benefits. Depending on your policy, it may also cover damage to fixed floor coverings, internal walls, and plumbing from sudden pipe failure.

Temporary accommodation

Where do you live if your house is uninhabitable? Many policies cover reasonable temporary accommodation costs while repairs or rebuilding are completed. That could mean renting another house or staying in a serviced apartment for a set period. We walk you through the specific limits on your policy.

Legal liability

Say a tree on your property falls onto your neighbour's roof, or a visitor is injured in your home. Legal liability cover, included in most policies, handles those situations. Limits and conditions vary, so check the policy wording or ask us to walk you through it.

What is not covered? Gradual damage, wear and tear, poor maintenance, and pest damage are standard exclusions. Some policies also set sub-limits for glass breakage or certain natural hazards. We go through the full exclusion list in the policy wording with you, so there are no surprises at claim time.

Hidden gradual damage deserves special attention. This is deterioration that happens slowly and is not immediately visible. Think of a plumbing leak behind a wall that rots the timber over months, or moisture from a failed pipe joint that quietly damages the framing. Because it is not caused by a sudden event, many house insurance policies exclude it. Some insurers do offer optional cover, or include it within certain policy tiers. Ask your broker. Undetected plumbing leaks can cost tens of thousands by the time anyone notices.

EQC and natural hazard cover explained

Earthquakes in Wellington and Christchurch. Volcanic activity in the central North Island. Flooding in Auckland and the Bay of Plenty. Severe storms like Cyclone Gabrielle. With that kind of exposure, strong natural disaster cover is not something you can skip. A two-tier system applies: the first layer comes from the Natural Hazards Commission (Toka Tu Ake, formerly EQC), a Crown entity, and the second layer comes from your private insurer. Here is how those two layers work together.

How the EQC levy works

Your insurer collects a Natural Hazards Commission levy as part of your premium. Every policy includes it. In return, the Commission covers natural hazard loss to your house up to the EQC cap per dwelling per event: earthquake, natural landslip, volcanic eruption, hydrothermal activity, and tsunami. Storm and flood damage sit outside the levy and are covered directly by your private insurer.

One thing people miss: EQC cover only exists while you hold a current home insurance policy. Let your policy lapse, and you lose your entitlement. That alone is reason enough to keep continuous cover.

What EQC covers vs what your insurer covers

If the rebuild costs after a natural hazard event exceed the EQC cap, your private insurer covers the remaining loss up to your nominated sum insured. This "top-up" cover matters more than most people realise. Many homes cost significantly more than the cap to rebuild. Without adequate cover above that cap, you fund the shortfall yourself. Thousands of Canterbury homeowners learned this the hard way during the 2010-2011 earthquakes.

We check whether your cover provides enough above the EQC cap, factoring in current construction costs, demolition, professional fees, and compliance upgrades.

Getting it right

Your sum insured matters more than your premium

Since the industry moved to sum insured policies, the homeowner nominates the maximum rebuild figure. Too low when you claim? You face a shortfall out of pocket. That is underinsurance, and it is one of the biggest financial risks for homeowners in Auckland, Wellington, Christchurch, and everywhere in between. Construction costs have risen sharply. Many people have not updated their sum insured to reflect current rebuild costs, especially after completing renovations.

Some policies offer an additional buffer above your nominated sum insured. You might see this called a sum insured extension or top-up. Helpful headroom, yes, but it is not a substitute for getting your base figure right. Think of it as a safety margin, not a shortcut.

How to calculate your sum insured

Your sum insured should reflect what it would cost to rebuild from scratch if your house were completely destroyed. Not the market value. Not the government valuation. It needs to cover demolition, debris removal, site clearance, council and resource consent fees, professional fees (architects, engineers, project managers), building code compliance upgrades, and inflation escalation during the rebuild period.

Our free sum insured calculator gives a starting estimate based on your home's size, construction type, build quality, and location. The Cordell Sum Sure Calculator (by CoreLogic) is another option used by many NZ insurers. Calculators do have limitations, though. Unusual builds, heritage homes, lifestyle blocks, and properties with difficult site access all throw the numbers off. For a more accurate figure, get a valuation from a registered quantity surveyor. And always update your sum insured after renovations. A new room, kitchen upgrade, or garage conversion all push your rebuild costs higher.

Residential building costs have risen more than 35% since 2019. A figure that was accurate three years ago could leave you tens of thousands short today.

Common sum insured mistakes

  • Using market value instead of rebuild costs

    Your home's sale price includes land value, which is irrelevant for insurance. Rebuild costs include demolition, consents, and professional fees that are not part of the sale price. These are completely different numbers.

  • Forgetting demolition and consent costs

    Before you can rebuild, the damaged structure must be demolished, debris removed, the site cleared, and council consent obtained. These costs add significantly to the total and are often overlooked.

  • Not updating after renovations or inflation

    Building costs have increased substantially, particularly in Auckland, Tauranga, and Wellington where demand for tradespeople is highest. If you set your sum insured years ago, or completed renovations without updating your cover, there is a good chance you are underinsured. That is why we review your figure every year at renewal.

  • Ignoring compliance upgrade costs

    If your home was built under older building codes, a rebuild may need to meet current standards. Upgrading insulation, seismic bracing, or accessibility requirements can add meaningfully to the total cost.

Factors that affect your home insurance premium

Several risk factors go into pricing your house insurance premium. Once you know what drives the number, you have levers to pull when the price feels too high.

  • Location and natural hazard zone

    Properties in areas prone to flooding, liquefaction, or seismic activity attract higher premiums. Proximity to the coast, rivers, and known fault lines all factor into the insurer's natural hazard risk assessment.

  • Construction type and materials

    Timber-framed homes, brick and tile, concrete block, and steel-framed buildings each carry different risk profiles. The roof material, cladding type, and foundation design all influence the premium.

  • Sum insured and rebuild costs

    Higher rebuild costs mean a higher sum insured and a higher premium. But cutting your sum insured to save on premium? That is a false economy if it leaves you paying the gap out of pocket when you claim.

  • Age and condition of the house

    Older homes may have outdated wiring, ageing plumbing, or deteriorating roofing that increases claim risk. A well-maintained house with modern systems helps keep premiums manageable.

  • Security features and excess level

    Deadbolts, alarm systems, and security cameras can reduce your premium. Choosing a higher excess will also lower your annual cost, but make sure you can afford the excess when you need to claim.

  • Claims history and occupancy

    Frequent claims push your premium up. Owner-occupied homes are typically cheaper to insure than rentals, because owner-occupiers tend to maintain the property better.

Sometimes a small adjustment makes a real difference. Increasing your excess, adding a security system, or bundling home and contents insurance together can all reduce your premium without cutting the cover you need. We help you find that balance.

What happens if you need to claim?

Nobody wants to think about claiming. But knowing what to do before something happens takes the panic out of it. Here is the process, step by step.

  1. Report the damage immediately

    Contact your insurer straight away. Before you start cleaning up, take photos and video of everything. If the property is unsafe, get out first. Write down the date, time, and circumstances, and keep damaged items for the insurer to inspect.

  2. Prevent further loss

    Your policy requires you to take reasonable steps to prevent further damage. Cover a damaged roof with a tarp. Turn off the water to stop a pipe leak. Board up broken glass. Keep all receipts for emergency materials, because these costs are typically recoverable.

  3. Lodge your claim

    Submit your claim with all supporting documentation and evidence. For natural hazard claims, the Natural Hazards Commission component is coordinated through your insurer.

  4. Assessment and settlement

    Your insurer assesses the claim. They may send a loss adjuster to inspect the damage in person. If the assessment does not seem fair, you have the right to dispute it. Once approved, settlement is paid per the policy wording, less any applicable excess.

  5. Rebuild or repair

    From here it depends on the extent of the damage. Your insurer may arrange repairs through approved contractors, or pay out for you to manage the rebuild yourself. For the full process, see our guide to making an insurance claim.

Why use a broker for house insurance?

You can buy home insurance directly. So why use a broker? When you buy direct, nobody checks your rebuild figure. Nobody reads the exclusions. Nobody makes sure your cover keeps up as building costs rise. We do all of that, and we work for you, not the insurer.

  • Annual sum insured review

    Every renewal, we check your sum insured against current rebuild cost data. Your cover stays in step with rising building costs. You do not get this when buying direct.

  • Policy wording explained

    Policy wording is dense. Full of legal language. We read it and tell you in plain terms what is covered, what is not, and where the gaps are.

  • Underinsurance checks

    We look at your sum insured, replacement values, and cover limits to find any gaps. Many Kiwi homeowners are underinsured without knowing it. We make sure you are not one of them.

  • Ongoing personal service

    Renovations, extensions, lifestyle changes. All of these affect your cover. We are available year-round to adjust your policy, and we recommend calling us before you start any major work so your sum insured stays accurate.

  • Renewal management

    Before your policy renews, we review the terms and check for any changes in cover or premium. Then we call you to talk through the options. No missed deadlines. No surprise premium increases.

  • No extra cost to you

    Broker services are built into the premium. You pay the same as buying direct, but you get professional advice and ongoing support year-round. No additional fee.

Full replacement vs functional replacement cover

Full replacement rebuilds your house to the same size, design, and specification as the original, up to your sum insured. Got a villa with native timber framing and a tiled roof? Full replacement aims to rebuild with equivalent materials. We recommend this option for most homeowners, particularly those with character homes or properties where rebuild costs are high.

Functional replacement takes a different approach. Your home is rebuilt to a similar standard and function, but not necessarily with the same materials, layout, or floor coverings. A three-bedroom house gets replaced with a three-bedroom house of similar size, using modern materials and a different floor plan. Lower premium, but the result may not match what you had before.

We explain the practical differences in the context of your specific home and help you choose the right balance of protection and affordability.

Common home insurance questions

What does home insurance cover?

Policies typically cover your dwelling against fire, storm, flood, earthquake, volcanic eruption, tsunami, landslide, theft, and accidental damage. Many also include glass breakage, lock replacement, legal liability, and temporary accommodation if your home becomes unliveable. Exact inclusions depend on your insurer and policy tier. Contents insurance is separate.

How does EQC work with home insurance?

The EQC levy is built into your premium. It covers natural hazard damage up to the cap. Anything above that is covered by your private insurer up to your sum insured. No current policy means no EQC cover.

How do I calculate my sum insured?

Start with the Cordell Sum Sure Calculator for an estimate, or get a quantity surveyor for a precise figure. Include demolition, consents, professional fees, and compliance upgrades. Update it after any renovations.

What is the difference between full replacement and functional replacement cover?

Full replacement rebuilds to the same size, design, and materials. Functional replacement rebuilds to a similar standard but not necessarily the same materials or layout. Full replacement costs more but gets you closer to what you had.

What factors affect my home insurance premium?

Location, natural hazard zone, construction type, age, claims history, excess level, and security features. Some of these you can change (excess, security) and some you cannot (location, age).

Why should I use a broker instead of buying direct?

We check your rebuild figure annually, explain exclusions in plain language, and make sure your cover keeps pace with rising building costs. It costs you nothing extra - broker fees are included in the premium.

What happens if I am underinsured?

You pay the gap out of pocket. If your rebuild costs more than your sum insured, that shortfall is yours. It is one of the biggest financial risks homeowners face, whether you are in Dunedin or Auckland.

How do I make a home insurance claim?

Contact your insurer as soon as possible. Take photos, secure the property to prevent further damage, and keep receipts for any emergency repairs. See our full claims guide for the step-by-step process.

You might also need

Home insurance covers the house. Contents insurance covers everything inside it - furniture, appliances, and personal belongings. Most homeowners bundle both, along with car insurance, through a single broker. We also arrange boat, motorcycle and trailer insurance.

Find out if your cover stacks up

What would it cost to rebuild your home today? And does your current cover match that number? We will review your figures, explain your options, and give you a straight answer.

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