Changes to Home Insurance

“I don’t get it”, said Freddy from the lounge.

“Get what?” Pebbles replied from the kitchen as she made her dad a cup of tea one Sunday morning.

“What the talking letter boxes are saying,” replied Freddy.

“The talking letter boxes” said Pebbles quizzically, thinking she had misheard.

“Yes. I don’t understand what the talking letter boxes are telling me to do,” Freddy grumbled.

At this point Pebbles dropped what she was doing, grabbed her mobile phone and started looking for the doctor’s after hour’s number.

As she walked into the lounge she caught the last few seconds of the advert Freddy had been watching and immediately breathed a sigh of relief. 

The advert in question was part of the campaign launched by IAG (the owner of the State, NZI and Lantern Insurance brands) to help inform and educate home owners about upcoming changes to their home insurance policies.

The adverts feature animated letter boxes talking to each other about changes to home insurance and the likely cost of rebuilding their homes. 

“What don’t you get?” Pebbles asked again.

“I don’t get why I need to worry about the likely cost of rebuilding my home.  From memory our insurance policy is for full replacement anyway.  Those adverts obviously aren’t relevant to me”.  And Freddy settled down again into his episode of Coro.

“Actually dad,” explained Pebbles, “the adverts are relevant to you.  In fact, they are probably relevant to the majority of New Zealand home owners.” 

Pebbles, who had been looking into the changes to home insurance for some of her clients, sat down and explained to Freddy what was happening, and why he needed to take the changes seriously.

“Most homes insured in New Zealand currently have a total home replacement policy.  This means that homeowners pay for their house cover by square meter.  If the home is totally destroyed, the insurer is responsible for demolishing the wrecked building and building a new house to the same size as the previous one, with no limit to the amount they have to pay.” 

“Within the next couple of months new home insurance policies provided by most insurance companies in New Zealand, will be on a Sum Insured basis.  Existing policies will automatically move across to Sum Insured on their next renewal date.” 

“A Sum Insured policy, sets out a maximum amount the insurer will spend if a house needs to be rebuilt.” 

“On your next renewal date, you are going to be asked to state the dollar amount you want to insure your home for, in much the same way as you would insure the ute and quad bike.”

“If the Sum Insured amount is too small, you risk being unable to rebuild your house to the same size or standard it was beforehand.”

“Sounds complicated,” said Freddy.

“It is dad,” continued Pebbles. “You are going to have to be more involved and have a greater understanding of the cost of rebuilding your home in the event it is damaged or destroyed. ” 

“But your insurance company, your bank and your solicitor can all help you understand the process a little better.”

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 


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