Earthquake insurance changes – here’s what you need to know.

Kiwis are a resilient bunch. The community spirit and attitudes shown by those affected by the most recent earthquakes are perfect examples of this.

But, while the clean-up has started and those worst affected are finding ways to start rebuilding, the truth is, sorting everything out with the insurance companies may take longer than expected.

In fact, to help the insurance companies best manage business whilst they deal with the influx of claims caused by the earthquake, a number of changes have been rolled out for any home, car or boat owner looking to take out a new policy.

Here’s a breakdown of the potential changes and how it could affect you.

The embargo zones

The insurance companies have created two embargo zones (designated areas affected by the earthquakes where there are changes to how easily they can write insurance), one for the North Island and one for the South Island. While the embargo zones will differ from insurer to insurer, the general boundary lines are described below.

North Island Zone

The embargo zone starts just south of Whangamata on the east coast then draws a line that extends south west across the central North Island to the west coast at Patea. Any policy owner south of this line will come under the new restrictions.

South Island Zone

The embargo zone starts on the east coast just north of Ashburton, heads inland to Double Hill before extending north to Karamea on the west coast. It then wraps north around the coastline and down the west coast to where it started.

What’s changed?

Any person applying for an insurance policy within these zones, whether it is for residential property, house and contents, a vehicle or boat, may find that:

• No new insurance policies will be written for an asset that hasn’t had an existing policy taken out on it.
• Any insurance policy taken out will have to match like-for-like the previous policy and be with the same provider.
• No changes can be made to the value of an existing insurance policy.
• Existing quotes on properties with in these zones may have been withdrawn.

What does this mean for you?

Well, if you’ve just bought a newly built home you may find it hard to take out an insurance policy to cover the house and the contents. The same goes for any brand new car or boat.

If you’ve bought an existing property, or are currently in the market for one, the only policy you may be able to take out could be a like-for-like swap of the existing policy on that property – with the same provider.

So, if you buy the property as an investment and plan to rent it out and the existing policy doesn’t include landlord's insurance, you could face some challenges.

Similarly, the value of contents within a home will differ dramatically house to house, so if you plan to live in the property, you might find yourself being offered an insurance policy that doesn’t quite match the value of your contents.

If you’re renting and need contents insurance, you may find yourself in a similar predicament.

What can you do?

If you need to take out an insurance policy in the near future, the one thing you can do is talk to an insurance broker to fully understand your options.

Potentially, the embargoes may be lifted at different times over the coming weeks and months, so the openness of insurers to write business may change. Having an open dialogue with your insurance broker is imperative to knowing what is going on.

Mike Pero advisers have extensive local knowledge and talk to the different insurers in New Zealand on a regular basis, so they will be well placed to guide you through what is happening and how you can get an outcome you’re happy with.