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.

Manawatu Standard - Property Weekly - - Front Page -

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.

Get it cov­ered:

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