What insurance considerations are important when purchasing large assets like cars and houses?

No worries, mate! Just arrived in New Zealand, and for big life decisions like buying a car or a house, insurance is indeed a top priority. Getting it wrong can lead to serious headaches. Don't worry, I'll walk you through the pitfalls I've encountered and the lessons I've learned, making sure everything is crystal clear and easy to understand.

Part 1: House Insurance

Buying a house is a big life event, and in New Zealand, banks won't give you a mortgage without house insurance. So, it's not just protection; it's a "hard requirement."

1. Core Concepts: Building Cover + Contents Cover

• Building Cover: This covers the "shell" of your house, meaning the building itself, including walls, roofs, foundations, and also garages, fences, and underground pipes and wires. If there's an unexpected event like a fire, earthquake, or flood, the insurance company will pay you to repair or rebuild.
• Contents Cover: This covers the "filling" inside your house, meaning your personal belongings, such as furniture, appliances, clothes, computers, jewelry, and so on.

Tip: Many people think once they've bought house insurance, they're all set. Then, their house gets burgled, and they find out none of their appliances or furniture are covered. So, it's best to buy both house and contents insurance together. Many insurance companies offer bundled discounts.

2. Key Point: Sum Insured

This is the most, most, most important concept in New Zealand house insurance!

• What does it mean?: Sum Insured is the "value" you set for your house, for example, $800,000. If your house burns down, the insurance company will pay you a maximum of $800,000—not a cent more.
• Why is it important?: This amount is set by you! If you set it too low, say your house costs $800,000 to rebuild, but you only insured it for $500,000, then if something happens, you'll have to pay the $300,000 difference yourself, which is a nightmare. If you set it too high, the premium will be very expensive, which isn't cost-effective.
• How to set it?:
  • Don't be lazy and use the government valuation (RV/CV): That price is for the land plus the market value of the house, which is completely different from the rebuilding cost.
  • Use the insurance company's online calculator: Most insurance company websites have something called a "Cordell Sum Sure Calculator." You input your address, area, structure, and other information, and it gives you an estimate.
  • Think one step further: Besides rebuilding costs, also consider demolition and debris removal, architect fees, and Council consent fees. These should all be included in the Sum Insured. So, adding an extra 10%-15% on top of the calculator's estimate would be safer.

3. New Zealand Specialty: EQC (Earthquake Commission) Insurance

This is government-mandated. Any house insurance you buy will automatically include an EQC levy.

• Its role: In the event of natural disasters like earthquakes, tsunamis, volcanic eruptions, or landslides, EQC will cover a portion of the damage first (e.g., the first NZD 300,000 of house damage), and any amount exceeding that will be covered by your commercial insurance company. You don't need to buy it separately; it's "built-in."

4. When to Buy

You must buy insurance the moment your house purchase contract becomes "Unconditional"! Because from that moment on, the risk of the house transfers from the seller to you. If something happens to the house before settlement and you don't have insurance, you'll bear all the losses. Therefore, your lawyer will usually urge you to get the insurance sorted.

Part 2: Car Insurance

New Zealand is quite different from many other countries in that car insurance is not legally mandatory. However, "not mandatory" doesn't mean "not needed." Risks are everywhere on the road.

1. Three Main Types of Car Insurance, Understand the Differences

• Full Cover

  • What it covers: It covers your own car and the other person's car/property. Whether it's your fault or theirs, your car will be repaired. If you crash into someone's Lamborghini, the insurance company pays; if someone crashes into your car and flees, the insurance company still fixes yours.
  • Who should buy it: Strongly recommend everyone buys this! Especially for new drivers, expensive cars, or cars with a loan (lenders will often require it). Don't try to save a few hundred dollars on premiums and risk tens or hundreds of thousands.

• Third Party, Fire and Theft

  • What it covers: Only covers the other party's car/property + your car if it's stolen or burned. If you crash into a tree yourself, sorry, you pay for the repairs.
  • Who might consider it: If your car is older and not worth much, and the repair cost might exceed its value. This is a compromise option.

• Third Party Only

  • What it covers: Only covers the other party! If you hit someone, the insurance company pays them. For your own car, whether it's hit, stolen, or burned, you're on your own.
  • Advice: This is the most basic coverage. While it's the cheapest premium, the risk is extremely high. If you accidentally scratch a Tesla or Porsche on the road, the repair costs could make you question your life choices. Unless your car is an "almost scrap" daily driver, it's not recommended.

2. Several Key Options

• Agreed Value vs Market Value

  • Agreed Value: You and the insurance company agree in advance that your car is worth a certain amount (e.g., $20,000). If the car is a total loss, they pay you $20,000. This value remains constant for a year.
  • Market Value: Paid based on what your car is worth on the second-hand market at the time of the incident. This value depreciates over time.
  • How to choose: Definitely choose Agreed Value! The payout amount is fixed, with no disputes.

• Excess

  • This is the amount you pay out of pocket first when you make a claim. For example, if the excess is $500 and repairs cost $3000, you pay $500, and the insurance company pays the remaining $2500.
  • The higher the excess, the cheaper your annual premium. You can adjust this based on your financial situation.

• Add-on Options

  • Roadside Assistance: If your car breaks down on the road, you can get free towing. Very practical.
  • Windscreen Cover: If your front windshield is chipped by a small stone, it can be replaced for free (or with a very low excess), and it won't affect your "no-claims" discount for the next year. Highly recommended!

Part 3: General "Insider" Advice

1. Shop around, don't just stick to one company: Don't just look at the insurance offered by your bank; it's not necessarily the best deal. Get quotes from several insurance companies' official websites, or find an Insurance Broker to help you compare.

2. Bundle and save (Package Deal): If you buy your house, car, and contents insurance from the same company, you can usually get a 10%-20% discount, saving a good amount of money.

3. Full Disclosure!: This is the number one rule! When applying for insurance, whether you've made claims in the past, your car has modifications, or your house has non-compliant structures, you must disclose everything truthfully to the insurance company. If you conceal information, the insurance company has every right to refuse your claim if something happens in the future, and all your premiums will be wasted.

4. Carefully read "What we don't cover" (Exclusions): After you receive your policy, take some time to read the "policy wording," especially the "What we don't cover" section. For example, many house insurance policies do not cover "gradual" damage (like slow leaks from pipes leading to rotting walls).

Hope this information helps you! Managing risks well in New Zealand will allow you to enjoy life here with more peace of mind. Wishing you all the best!