There are many important details to consider when purchasing your home. One of those is insuring your home – with home and contents insurance. In some cases, such as for first home buyers some banks require proof of insurability in order to approve a mortgage. Additionally in locations such as Christchurch first home buyers cannot access first home grants if the home is deemed uninsurable.
So insurance is an important part of this home purchase process. As an online marketplace that lists homes from around New Zealand. Shopless has investigated the things you should know about when researching insurance options for your home. And discusses the potential details you might encounter when purchasing home insurance.
Make Sure to Insure Your Home for the Full Replacement Value.
To reduce the premium of insurance some people underestimate the amount they should insure their home for. The home should essentially be insured for the replacement amount – that is the amount that it would cost to demolish and rebuild the entire home. If a major event occurred. Many homeowners are unaware of the complexities involved with rebuilding a new home. Some homes may even have an elevated risk of damage so it is important to comprehensively gauge how much the home should be insured for.
There are also recent reports of materials and construction costs inflating. Causing a dramatic increase in building a new home, so when considering the amount you should insure your new home for it is also important to consider the prices of current materials. If you are aware of what the home was previously insured for, or if you are renewing your home insurance. It is important to take this price increase into consideration, and not assume that you should insure your home at the same price as it has been insured previously.
Many insurance companies have house insurance calculators to give you a good estimate on what you should currently insure your home for. This is often a free tool, and does not mean you have to commit to a set insurance company to insure your home.
Do Your Research
Recent Consumer NZ analysis showed that there was a $2000 difference between the cheapest and most expensive insurance policies on the market. For larger dwellings the estimates have a $3000 variation. Showing the importance of researching your options when it comes to insurance companies. Additionally Consumer NZ found that insurance premiums had risen by 5.6 in one year (2021). Emphasising the need to continually evaluate whether the company you choose to insure your home is the correct option for your circumstance.
Read the Policies
As many of us are aware with insurance it is important to review what you are covered for. The Insurance Council of New Zealand (ICNZ) suggested that kiwis are overconfident when it comes to insurance. That we are happy to commit to house insurance without reading all of the fine print. Particularly when reading what the insurance may or may not cover. They stated that mini disasters such as gale force winds damaging property serve as a reminder to people to review their insurance. Insurance is an annual cost associated with purchasing a home. So having a comprehensive understanding of what the insurance covers for your home is important.
Be Aware of Flood Risk Locations
Insurance companies can be very particular about flood zones, and where the home is located. Being in a flood zone will not necessarily affect the cost of your insurance. But an insurance company may have a higher excess for homes within floor zones. This could be either a specific excess for flood related incidents. Or a larger excess due to the zoning of the home. Although flood zoning is a general question of all insurance. It is always important to clarify what the incurred cost may be for purchasing in a flood zone.
According to an NZ herald article floods have become more damaging and more frequent in the past 10 year. Part of this being because there are more homes being built near rivers or flood zones. But also other contributing factors. Flood zones differ between district councils, and are also often updated based on the behaviour of recent flood situations. You can access flooding maps etc. on your local council website.
There may be other environmental risks that you may need to consider when insuring you home. However the flood risk is the most common caveat in insurance policies, in homes across NZ.
Getting insurance can be a complicated but necessary process when purchasing your home. Once you have it, you may have a better understanding of the risk associated with your home purchase. And peace of mind that you are covered. If you are looking for a new home, or looking to list your existing home make sure to check out Shopless, an online marketplace. We have home listings across New Zealand, for your next home purchase.