What your house and contents insurance actually covers

Is your home and contents insurance covering what it should be? David Saunders, MAS Product Manager – General Insurance, shares some key considerations to ensure you don’t get caught out. 

Most of us take out our first household insurance policy as we enter adulthood and then adjust it when we meet certain milestones and our lives evolve. It helps bring peace of mind and, in the best-case scenario, we don’t have to think about it much more than that. 

The catch is, in not thinking about it, people sometimes lose sight of exactly what’s covered, to what value, and under what circumstances. Checking in on the parameters of your policy, and staying up to date on details, is a small act that can have a big impact. To help you avoid any surprises, we’ve highlighted some common knowledge gaps that can catch people out. 

What’s covered and what’s not? 

When it comes to any type of insurance, David Saunders, MAS Product Manager – General Insurance, says it’s important to keep in mind what it’s designed to do: Cover you when sudden, unforeseen events occur. If disaster strikes, be it fire, floods, an earthquake, an accident, a burglary or vandalism, that’s when your insurance kicks in.  

David says a common misconception, however, is that issues that result from gradual deterioration can also be claimed. In fact, wear and tear, lack of maintenance or issues like slow leaks that develop over time are not typically covered by house insurance policies. MAS may cover some costs when the loss has been caused by an internal water system that is hidden from sight, but it’s worth noting that limits apply. 

Another factor that people sometimes forget is that insurance companies don’t cover the land your home sits on, so if a severe weather event or earthquake causes damage to the area under or around your home this will be assessed by the Natural Hazards Commission (NHC). Often when there is damage to the land, there is damage to the house as well, so MAS will handle the NHC claim on your behalf, providing you with one point of contact for both claims.  

What amount of coverage do you have? 

Being clear on when you’re covered is one thing, but having the right amount of coverage is also critical. The most common type of house insurance in New Zealand is ‘Sum Insured’ or ‘Agreed Value’. This means your house is insured to a fixed dollar amount, which you’ve agreed with your insurer, and that’s the maximum amount that will be paid out. It’s important therefore that you set this accurately, reflecting what you’d actually need if you had to rebuild completely.  

While most insurers do adjust sum insured policies annually for inflation, there could be other significant price fluctuations or economic factors to consider. “It pays to be conscious that certain costs, such as building materials and labour, can rise over time or spike during a widespread event,” David says. “If your agreed value hasn’t been updated since you took out the policy, there could be a shortfall if you have to claim years later. This is obviously something you want to try and avoid as best as possible.” David suggests revisiting this amount when your policy renewal notice arrives each year, and make sure it still feels right. 

An alternative house insurance coverage type which MAS is one of the only New Zealand insurers to offer, is Full Area Replacement. Rather than insuring at a fixed dollar value, full area replacement means the insurer will pay the reasonable costs for a full rebuild to the same square metreage and condition of your house as it was before the loss. This option takes the onus off the homeowner to correctly estimate what they might need. Note this is subject to MAS Underwriting criteria and acceptance, and Area Replacement is not available for all property. Where it is available, MAS require a supporting Sum Sure estimate, or if no estimate is able to be completed, then a valuation would be required. 

Don’t forget about contents insurance 

Contents insurance is another policy to keep track of and update as life moves on. There are 2 things to keep an eye on here. Check the amount you’re insured for to see if it still accurately covers the total replacement value of your possessions. This value can climb gradually over time without people necessarily thinking about how that affects their insurance.  

You should also update your policy if you acquire any individual items of high value. Most policies will have a set amount they’ll pay out for individual items like art, jewellery or electronics – this is known as a ‘single-item limit’. If you’ve got an item or items of higher value than the limit, you can increase your cover for those items specifically. 

Ultimately, David says your insurance is there to work for you when a sudden, unexpected loss occurs, but staying across it is the best way to have peace of mind that the right numbers are in place.  

“Checking your schedule on an annual basis when your renewal notice arrives is a good start. Or if you see something happening somewhere else, a weather event or an accident, have a think about your own situation: ‘If that were me, what would I need to help me actually get myself back on my feet?” 

Other key moments to review your house and contents insurance: 

• Renovations: Extensions or significant renovations can increase your property’s overall rebuild value. 

• Shifting house: A different sized home and/or a new neighbourhood will impact both your house and contents insurance. 

• Marriage or de facto partnerships: Combining households typically means merging your possessions and you should review your contents insurance in light of this. 

• Separation or divorce: Conversely, dividing households is likely to affect this too. 

• Starting a business: If you’re keeping expensive equipment related to your business at home, it pays to check whether your contents insurance covers this.  

If you have any questions about your insurance policy, reach out to the MAS Member Support Centre for a chat at 0800 800 627. 

This article provides general information only, and is not intended to constitute financial advice. Before taking out any insurance product, you should carefully consider the terms and specific policy wording. Underwriting criteria will apply.