How much should I insure my home and contents for in New Zealand?

Home and contents insurance can be tricky. No one wants to pay more for insurance than they have to, but being underinsured can cause problems when something goes wrong. How much you need to insure your house and contents will also differ from person to person.

Our guide to insurance will help ensure you are insured for just the right amount.

What is home and contents insurance?

Before we get into the nitty-gritty, let’s go over the basics. Home and contents insurance will cover your external home (via home insurance) and the possession inside (via contents insurance) and ensure that you'll be covered in a disaster like a flood, fire or earthquake.

Due to an increasing amount of natural disasters, the cost of home and contents insurance is rising in New Zealand. Some people are even dropping contents insurance all together to save money in the long run.

Do I need home insurance in New Zealand?

Most providers of insurance combine home and contents into one policy and will offer you a discount for buying them together. Most mortgage providers (ie. banks) will insist that you get home insurance as a pre-request to getting a mortgage. It’s usually up to you whether you want to take out contents insurance, or not.

If your house burns down, most people can’t afford to rebuild without the help of insurance. It’s also relatively cheap to insure your home. Some insurance policies are as little as $1,000 a year for a $450,000 home.

Do I need contents insurance in New Zealand?

On the other hand, contents insurance is quite expensive when you compare apples with apples. A $25,000 contents insurance policy can easily cost you $500 a year. If you’re trying to save money, skipping contents insurance and just putting some extra savings aside could be worth it.

The best way to determine whether you need contents insurance is to consider how inconvenienced you would be if you lost all your possessions. If you only own a few items with a high monetary value, that $500 a year spent on a policy could be worth putting into a high-interest savings account.

How much should I insure my house for?

The best way to estimate how much you should insure your home for is to use a home insurance calculator. These calculators are helpful for determining what the cost of rebuilding your home after a disaster will be. Remember that insurance only covers the cost of your policy, and the actual building costs can be higher.

You can find home insurance calculators on the websites of most major New Zealand insurers including Tower and Initio.

Some of the costs home insurance covers includes:

• Building costs

• Professional fees (ie. builders, contractors, architects)

• Demolition fees

• GST

What does a home insurance policy cover?

Every home insurance policy is different, and you should always read yours thoroughly before signing on the dotted line. Think of home insurance as covering anything that you wouldn’t pack up and take with you when you move. For most homes, an insurance policy will cover:

• Any residential buildings that make up your home, including garages

• Structures on your property, including garden sheds and fences

• Fixed carpets and floor coverings

• Fittings and fixtures that are permanently attached in the home (fixed wardrobes, kitchens, dishwashers, ovens, flooring)

• Any structural improvements that are permanent (ie. decks, additional rooms built onto your home)

• Driveway

What’s not covered?

• Collapsable pools or structures that aren’t permanent

• Landscaping and gardening

• Blinds, drapes and curtains

What does a contents insurance policy cover?

Every contents insurance policy is different, and you should always read yours thoroughly before you sign on the dotted line. Contents insurance is the opposite of home insurance - you can think of it as anything you’ll take with you when you move. For most homes, contents insurance will include:

• Furniture and furnishings that aren’t permanent (beds, couches, tables etc.)

• Electrical equipment, including computers and portable gadgets, and appliances

• Clothing, footwear, jewellery and accessories

• Moveable carpet and rugs

• Large equipment that is portable (instruments, luggage, sports equipment etc.)

• Blinds, curtains and window coverings

Is it better to buy a combined home and contents policy?

It will always be more expensive to take out home and contents policies than just home insurance. However, most home and contents bundles are only $2-400 more expensive to add contents insurance to the policy.

The best way to tell if you’re getting value for money is to get quotes from multiple insurers and do a price comparison for home insurance plus home and contents.

Remember that excesses apply to almost all insurance policies, and sometimes your excess can be the cost of contents insurance itself. For example, if your home and contents bundle is $300 more expensive than home-only insurance, and your excess is $300, you may not want to take out content insurance if most of your possessions are under $1,000 to replace.

What should I look for in an insurance policy?

While you’re reading the fine-print the following policies are something to look out for.

• Affordable cover. First of all, you need to make sure the annual cost of insurance is within your budget with an excess that you can pay should you need to make a claim.
• Temporary accommodation. For home insurance, look for a policy that includes temporary accommodation coverage. This means if your home is damaged, your policy will pay for you to stay someplace else.
• New for old replacement. Make sure your cover lets you replace your old items with a new replacement. This means if you drop and damage a camera that you bought new but is now old you won’t get shortchanged.
• Legal liability. Legal liability protects you if someone else’s property is damaged in your home.
• Extra rebuilding costs. Before you take out home insurance, ensure your policy covers you for any costs that are related to rebuilding but aren’t necessarily material or construction costs. This could include debris removal, demolition etc.
• Locks. If you are burgled, some insurance policies will include an excess-free payment if your security is up to scratch.
• Mortgage discharge. This means if your home is damaged, your policy will cover the legal and administrative costs to discharge the mortgage.
• Inflation protection. As building costs increase, a good policy will take into account the inflation of labour and material so that the sum you are insured for is automatically adjusted to the market.