House Insurance

House insurance covers the house.  What items fall within the definition of house will depend upon the definitionof “house” in the policy. 

It is important to check your own policy to see what comes within the definition of “house” and what comes within the contents.  But generally, the house will include the main building, any domestic outbuildings and structures and may include items such as the driveway, swimming pools, fences, gates etc.  It is unlikely to cover trees or shrubs or gardens and most exclude retaining walls.

The type of cover provided falls into three general categories:

1. Indemnity value
   If your house is insured for indemnity value, you are only covered for the value of the house in the age and condition it was at the time it was damaged.  How this is calculated will depend again on the exact wording of the policy.  But it is most likely to be based upon the cost of replacing the house, less depreciation for age and condition.  This figure will be determined by an independent valuer, appointed by the insurance company.
   
   If the house is totally destroyed, that is the amount you will be paid.  But if the house is damaged and not destroyed, within reasonable limits, the insurance company will have to replace or repair with new items, and cannot actually depreciate the repair costs.  If it chooses to repair, it has to repair and this will often mean new for old anyway.
    
2. Replacement Cover with a sum insured limit
   This is probably the most common type of house policy.  You will be covered for the cost of rebuilding your house or repairing your house to the same condition when it was new.  But this is limited to the sum insured specified on the policy.  Your policy certificate will include a sum insured limit, and the insurance company will not have to pay more than that.  Unfortunately if it costs more than that amount to repair or reinstate your house, you will be out of pocket.  But there are important points to remember most policies will say that if you don’t actually reinstate your house or repair your house, but opt for a cash settlement, the insurance company only has to pay indemnity value. 
    
3. Replacement without sum insured
   This will be available in most top of the line policies.  The insurance company agrees to reinstate the house regardless of the cost.  But the amount the insurance company will pay will be based upon the square metreage you disclosed to the company when you took out the policy.  So if you underestimated the size of your house, there is going to be a limit, just not a monetary limit.  Again, if you choose not to reinstate, and want cash most policies will only give the indemnity value.
   
   Under Insurance
   
   The most common problem that people incur is under insurance.  Either because the sum insured is inadequate or the square metreage on the policy is inadequate, it is going to cost more to reinstate or repair the house than they have cover for.  If that is the case, think carefully about how your sum insured was reached.  If the insurance company recommended a sum insured, and that turns out to be inadequate based on you providing correct information, you may be able to challenge the sum insured limitation.  Similarly, if the insurance company’s calculated cover based on square metreage in a no sum insured replacement policy is inadequate, you may be able to challenge the price per square metre used by the insurance company.  Don’t be afraid to get a second opinion.
   
   Cash Settlements
   
   If the insurance company wants to cash settle with you, you should not automatically assume that the price being quoted by the insurance company is enough.  There may be numerous reasons why the price quoted by the insurance company could be less.  These include:

- In the case of repairs - unidentified damage

- In the case of replacement or total loss - a low valuation provided by a valuer retained by the insurance company.

- In the case of replacement - or repair overly optimistic (low) estimates by builders or repair companies that have no intention of doing the work themselves.

In any of these cases, do not be afraid to get your own independent appraisal, valuation or assessment.  The insurance company does not have the sole right to determine what you’re entitled to, and if you have any concerns, you should instruct your own experts to make sure you are getting to what you are entitled to.

Temporary Accommodation

Almost all house policies include cover for temporary accommodation.  If you cannot live in your house because of damage, the insurance cover will pay temporary accommodation for you and your family.  Usually this has a timeframe and a sum insured limit.  But you will have cover.  The insurance company is not obliged to but may be prepared to make cash settlement to allow you to find alternative accommodation, particularly in a crisis where the insurance company is aware that it is difficult to get accommodation.  Remember also that under most policies this includes all members of your family living with you.  So if your extended family or whanau is living with you, it is quite likely that they will be covered as well. 

Building Elsewhere

Some policies will allow you in the case of a total loss build elsewhere along as it does not cost any more.  So if you don’t want to go back to your section, you may be able to acquire some land somewhere else (possibly with the help of the EQC payment for the land) and rebuild elsewhere.  You will probably be able to pocket to the extent of the loss of your land, but it is an option that you may be entitled to.  Even without such a benefit, your insurance company may be prepared to allow you to build elsewhere, as long as it doesn’t cost them any more.  Don’t be afraid to ask.

Extra Benefits

Finally, a lot of policies on the market these days are full of bells and whistles.  Insurance companies compete by offering some of the craziest benefits under policies such as stress benefits or death benefits.  Polices have also been known to cover things like cattery or kennel fees for pets.  Check your policy meticulously, and see if there is anything in the policy that you may be entitled to claim for.  Your insurance company is unlikely to point this out to you voluntarily.