You have more insurance than you think

Did you know, when you pay your regular household insurance premium, you are in fact getting three layers of protection? First and foremost, you are getting what we all think of as regular insurance should your home suffer sudden and unforeseen damage, such as a car crashing through the wall, a fire, flood or storm damage.

The second layer is EQCover. This is disaster insurance for damage to land within eight meters of your home and up to 60 meters of the main access way to your house, as well as damage to your home arising from earthquakes, landslips, volcanoes, tsunami and hydrothermal activity. This cover is paid for through a levy your insurer collects on behalf of Toka Tū Ake EQC (Earthquake Commission).

The amount of EQCover for damage to your home is $300,000 and the flat rate levy is $552 (inc GST). As everybody pays the same for this disaster cover, no matter where they are in the country or the regional risks, say for earthquake, they face.

Losses to your home above EQCover limits are covered by your insurer up to your policy limits. Your private insurance policy does not cover land damage, but it covers property other than the home EQCover does not cover.

EQCover supports the widespread uptake of disaster insurance by means of it being priced at a flat rate. Currently, around 96% of New Zealand homes are insured. This is a very high rate compared to most other western countries. It’s also very high when considering the uptake of all risks insurance in parts of the world subject to high natural hazard risks where it is often difficult, if not impossible, to get regular commercial cover for certain risks, such as earthquake or wildfire.

That we have such a high uptake of all risks insurance is a very good thing. The Canterbury earthquakes resulted in economic losses of around $40 billion. EQcover met about $11 billion of these losses and private insurers met about $23 billion.  Slightly more than half of the private insurance losses were house and contents policies and the rest commercial losses.

For both private insurers and Toka Tū Ake EQC, the bulk of the losses were borne by overseas based reinsurers.  Reinsurers insure the insurers. They met more than half Toka Tū Ake’s losses and about 75% of private insurance losses.

The sharing of risks with global reinsurers ensures your insurance company will be in good shape to pay out claims in the event of a major disaster.

All New Zealand insurers are obliged to have enough capital or reinsurance in place to meet a one in a thousand year earthquake. This is so you and I can be confident our insurers will be there to pay claims in the event of catastrophe.

While all of these layers of insurance may seem a little complex, they are all designed to promote insurance being in place for as many of us as possible and to ensure, should the very worst happen, your insurance company will be there to help you.

If you’d like to review your insurance policies, get in touch with Over Fifty Insurance.