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How Earthquake Insurance Works.

geos_christchurch04_1.jpgAt the time of writing the people of Christchurch are still enduring the aftershocks of the earthquake that shook their region just a few days ago. Our thoughts and best wishes go to them, and to the many FORTIfi clients who live in the Garden City.

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The disaster in Christchurch and the insurance claims that will follow has led many people to wonder about their own insurance in the case of such an event. Logo Green X-small.jpg
Here’s how it works;

eqc_1.jpgWhen you pay your house and contents insurance there is a portion of it that goes to the Earthquake Commission (EQC). EQC is a Government owned Crown Entity that was established in 1945 to provide earthquake and war damage cover for purchasers of fire insurance. Later, cover for other natural disasters was included and the cover for war damage was dropped.

Since it began the EQC has built up quite a nest egg in its Natural Disaster Fund. That fund now stands at about $5.6 billion. The fund is backed up by reinsurance from overseas groups and a Government Guarantee. The Government Guarantee ensures that EQC will always be able to meet its obligations, regardless of the circumstances.

EQC pays out on claims from New Zealand residential property owners for damage caused by earthquake, natural landslip, volcanic eruption, hydrothermal activity, tsunami; in the case of residential land, a storm or flood; or fire caused by any of these.

A staggering reality is that in previous large disasters, it has been found that one third of people impacted are uninsured, a further third are underinsured, while only one third have adequate cover.

So what are you entitled to?

► The EQC’s cover is for residential property.

► Property Insured

•Dwellings (self-contained premises used as a home, including apartments);
•Most personal property but excluding some types (e.g. motor vehicles and art);
•The land immediately around the dwelling, main access-ways, and retaining walls, within certain limits.

► Types of natural disasters covered

•Earthquake, natural landslip, volcanic eruption, hydrothermal activity, tsunami;
•In the case of residential land, a storm or flood;
•Fire caused by any of these.

► Extent of Cover

•Dwellings are insured up to a maximum of $100,000 + GST.
•and personal effects are insured up to $20,000 + GST.
•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. •Some retaining walls are covered, but on an indemnity basis.

But remember:

► The EQC payout is only for people who have current fire insurance with a private insurer.  If a person has no insurance - the rules of the EQC state,  there will be no payout. You are only covered if you have taken out and paid for insurance for your home and contents.
► The advantage of using a broker for your insurance will often show at the time of claim.  In general terms, a person who uses a broker will get a payout of 10% - 15% higher than those who don't.  This is simply because of the experience of the broker in knowing how to structure your insurance policies and what can be claimed.

Some other information:
► If you live in Christchurch and find yourself in financial hardship, contact your insurance company.  Many are considering offering temporary premium holiday on life-related insurances.  Similarly, if you are in KiwiSaver, contact your provider and see if you qualify for a hardship withdrawal.
►Vehicles are not covered by the EQC.  Claims need to be made to your vehicle insurance provider. 
► Residential losses that exceed the $100,000 EQC cap will require a coordinated role between your private insurer and EQC. In these cases your insurer will be your primary point of contact and they will liaise with EQC.
► EQC only cover physical damage to your property. Therefore, if your house is uninhabitable then you will need to claim for temporary accommodation costs from your insurer.
► All claims for non residential losses will need to be made to your private insurer.
► The website www.open2view.com is very generously offering free property photography for insurance assessment purposes in Christchurch.  Contact is Jamie Armstrong who is co-ordinating this initiative.  Click here to send Jamie a message  jamie.armstrong@open2view.com.  Mobile: 027 220 2559

For more information:

See the EQC website for information or to make a claim = www.eqc.govt.nz.

Click here to read our article on Tips for Saving Money on Your Insurances.

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