Cutting insurance a false economy
The devastation caused by the earthquake in Christchurch, and the havoc wreaked by the heavy rainfall in Manawatu this week, bring to mind the importance of having household insurance.
Although the Earthquake Commission (EQC) provides cover for the damage caused by earthquakes and other natural disasters, it will only go so far. The EQC was established by the Government in 1945 to provide earthquake and war-damage cover for the purchasers of fire insurance. Later, cover for other natural disasters was included, but cover for war damage was dropped.
The modern EQC is a Governmentowned entity.
For more than 60 years, it has been collecting premiums from insured people. And during that time, a substantial nest egg, called the Natural Disaster Fund, has been built up.
The EQC pays out on claims from New Zealand residential property owners for damage caused by earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, and tsunamis.
In the case of residential land, it pays out on claims from property owners for damage caused by storms, floods, and fires that result from natural disasters.
Dwellings (self-contained premises used as homes); personal property, excluding some types (motor vehicles and art, for example), and land immediately around the dwelling, main accessways, and retaining walls, within certain limits, are covered.
Dwellings are insured up to a maximum of $100,000 plus GST, and personal effects are insured up to $20,000 plus GST.
The EQC pays the value of damaged land at the time of the earthquake or natural disaster, or the repair cost, whichever is lower.
Dwellings are covered on a replacement-value basis. Personal property is insured on the same basis as the household insurance policy covering the same property.
If you have no household insurance you are not eligible for any payment from the EQC, which is funded by a levy that is a percentage of household insurance.
Although homeowners paying off a
Not having house and contents insurance could be a false economy. mortgage must have home insurance, people who are mortgage-free are in a vulnerable position if they have let their insurance lapse.
Several insurance companies are reporting that clients are changing their insurance status for economic reasons. Some clients are reducing their cover from comprehensive to third party, in the case of vehicles, and also reducing their household contents insurance.
Private motor vehicles are not covered by the EQC for damage caused by a natural disaster.
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