How to reduce your home insurance premiums in NZ

You might have noticed that we’ve already used the terms home insurance and house insurance in this article. This is because both refer to the same type of protection. Here’s a quick introduction to what it is.

House/home insurance is essentially a financial safety net for your property, protecting you from the costs associated with damage or loss. In Aotearoa, this type of insurance covers the structure of your home and any permanent fixtures – think your walls, roof, deck and built-in features.

Different insurers and policies will cover for different things, but, generally, you might expect a home insurance policy in NZ to cover you against losses or damage due to fires, theft, vandalism, accidental damage (think broken windows) and natural disasters.

Now, it’s important to clarify that house insurance typically doesn’t cover the personal belongings you keep inside your house. Think furniture, laptops, jewellery, musical instruments, art etc. All of this would usually be covered by contents insurance.

This is important because, if you were unlucky enough to suffer a break-in, where there was minimal damage to your home but a lot of valuable items were taken, you probably wouldn’t be covered for any of this under your home insurance policy. While it’s frustrating that this will mean forking out for additional policies, many insurers, like Trade Me, will typically offer discounts if you choose to do both with them.

Another important thing to know about buying home insurance in Aotearoa New Zealand is that, as well as there being different providers to choose between, they’ll usually offer varying levels of coverage, at different costs. Make sure you read through these options carefully to be fully aware of what you’re purchasing, and whether it will suit your needs.

To speed the process up, it’s also worth noting that the insurer will want to know some details about your home. This will include things like when it was built, how many floors it has and the materials used in key elements such as the roof and walls.

As we’ve said, there are many providers offering a range of different policy options to Kiwi looking to buy home insurance. How much you’ll pay in home insurance premiums will also depend on factors including its value, where it is and even whether there has been previous work done on it.

This means that providing a single figure for the average cost of home insurance in NZ isn’t that helpful. According to MoneyHub:

• In Tāmaki Makaurau/Auckland, the cost of house insurance for a single-story property with a brick exterior and tile roof, valued at $700,000, ranged from roughly $1,700 to $3,000.
• In Te Whanganui-a-Tara/Wellington, for a home with the same specifications and value, premiums were higher, typically ranging from around $2,180 to over $4,200.
• In Ōtautahi/Christchurch, premiums ranged from approximately $2,200 to $3,300.

MoneyHub says that most of the differences in these ranges depended on the location and the insurer.

If you don’t like the look of the numbers above, here are some ways you might be able to reduce the costs of your house insurance premiums.

If you don’t have a specific home in mind yet, be aware of how your eventual choice might impact the costs of your insurance.

As part of your due diligence, you should be looking at things like how prone a house is to natural disasters like flooding or erosion (a LIM report is your go-to here). When you’re doing this, be aware that increased risks of such events tend to come hand-in-hand with higher insurance costs.

Got a squeaky clean record when it comes to making insurance claims? Look for providers or policy products that reward this. At the end of the day, insurers are looking to avoid paying regularly to customers, so if you can demonstrate that you’re unlikely to be a big risk, you might find there’s financial benefit for you too.

We’ve already mentioned that it’s common for insurers in NZ to offer multi-policy discounts to customers who already have insurance with them. While it might be most common for people to buy their home and contents insurance policies at the same time, and so access the multi policy discount in this way, it doesn’t have to be this combination.

For example, if you already have a car or boat insurance policy with Trade Me, and want to buy your house insurance from us as well, you’ll be able to reduce the cost of your home insurance this way (and vice versa!). By the way, you can also get up to a 15% discount on some policies just by being a Trade Me Member!

Another way that the way you pay can impact your overall costs relates to the frequency. Many insurers, if not most, will charge you less if you choose to pay in a single lump sum, rather than in gradual instalments. This is because there are fewer admin costs for the insurer to deal with this way. Even if you can’t pay it all at once, generally the less frequent the better. I.e. paying fortnightly is better than paying weekly, and paying monthly is better than paying fortnightly.

Just as being in a flood prone area will likely increase the costs of your home insurance premiums, the relative security of the neighbourhood will also be a factor.

Choosing a safe area to live in will have many benefits beyond simply lowering the cost of your home insurance, and should again form part of your due diligence, but you can guarantee it will be a factor your insurer looks at. NZ Police publish crime statistics online, which help you see what, if anything, has been happening in the police district you’re interested in.

Regardless of where you end up buying, it’s also worth checking out if potential insurers offer reduced premiums for professionally installed security systems. This isn’t uncommon, as it again reduces the risk from the insurer’s perspective.

This comes back again to really taking the time to read and understand the policies offered by home insurers in NZ. This might also include cracking out an online dictionary, as there’s plenty of insurance jargon out there, some of which might be new to you.

One of the terms to get to grips with is ‘“sum insured’” A sum insured policy is a type of insurance where you specify the maximum amount the insurer will pay out in the event of a claim. In the world of home insurance, this means your policy will typically be based on the estimated cost to rebuild your house, rather than reimbursing you for the market value or what you originally paid. Given that this cost may well be lower than the price you paid, these policies can be cheaper.

A common way to reduce your home insurance premiums is to increase your excess. But of course, this comes with risks. The excess is the amount that you’ll pay if you have to make a claim.

By increasing this amount, you reduce the insurer’s contribution to the claim payout, and they’ll usually reward this by reducing your premium. But, to an extent, this is a gamble, as you might end up paying more for a costly excess payment than you would through the initial premiums. Think carefully about whether this is something you’re comfortable doing.

Not to labour the point, but check what you’re buying carefully. Of course, this is mainly to check that you are covered for the things you need. But it’s also important to make sure you aren’t paying extra for things you don’t.

For example, many home insurance policies will let you add “unoccupied home cover”, which is intended for people who spend long periods away from their house, leaving it empty. If you know you aren’t going to do this, make sure you aren’t paying for it!

*Disclaimer: This article is intended as a general guide to home insurance. Home insurance policies from different providers can differ in what they cover and their associated costs. Be sure to read any home insurance policy carefully before purchasing so that you fully understand the terms and conditions associated with it.