When a disaster strikes your property in New Zealand, dealing with insurance claims can be stressful. If you find yourself in a dispute with your insurer over a payout, it’s essential to understand your rights and how to navigate the claims process effectively. This article outlines the steps you can take to protect your interests and achieve a fair outcome.
Understanding Your Property Insurance Policy
Before disaster strikes, take the time to thoroughly read and understand your property insurance policy. Insurance policies can be complex, and knowing the details is paramount. Key areas to focus on include what events are covered, the extent of the coverage, any exclusions that apply, and the specific claim procedures required. Often, insurance policies detail the definition of common terms, clarify instances when they might not pay out, and what evidence you will need to provide to support your claim. The Insurance Council of New Zealand (ICNZ) provides resources and information about understanding insurance policies, which can be helpful while you review it.
Types of Property Insurance
In New Zealand, there are primarily two types of Home Insurance policies:
- Replacement Value: This policy covers the full cost of rebuilding or repairing your home to its original condition, without deducting for depreciation. This is often considered the more comprehensive option.
- Indemnity Value: This policy covers the current market value of your home, which takes into account depreciation. This means you might receive less than the full cost to rebuild or repair your home.
Understanding which type you have is crucial. For example, if your roof is 20 years old and damaged in a storm, a replacement value policy would, in theory, cover the cost of a new roof. Meanwhile, an indemnity policy would only cover the depreciated value of the old roof, potentially leaving you with a significant out-of-pocket expense. Also, be familiar with the concept of ‘sum insured’. The sum insured represents the coverage limit specified in your policy. It’s the maximum amount your insurer will pay out if your property is totally destroyed or needs major repairs. Often, you might need to engage a quantity surveyor to assess your house’s rebuild amount. It is crucial to have this set at an amount adequate to rebuild your home in today’s construction market.
Common Exclusions in Property Insurance Policies
Property insurance policies typically have some standard exclusions. These often include:
- Wear and Tear: Gradual deterioration due to age or normal use is generally not covered.
- Pre-existing Conditions: Damage that existed before the policy started or before a specific event occurred is typically excluded.
- Faulty Workmanship: Damage caused by poor construction or renovation work might not be covered.
- Unoccupied Property: Some policies have clauses regarding unoccupancy, potentially affecting coverage if your home is vacant for extended periods.
- Earthquake & Natural Disaster cover through EQC: Earthquake damage to your home and land, and damage from other specific natural disasters (landslip, storm or flood damage to your land, geothermal activity and hydrothermal activity) are covered by the Earthquake Commission (EQC), but only up to certain limits.
Knowing these exclusions in advance helps avoid surprises during the claims process. For instance, if your roof leaks because it’s old and deteriorated, your claim may be denied under the wear and tear exclusion. Similarly, if your home floods due to a pre-existing plumbing issue you haven’t addressed, you might not be covered.
The Claims Process: Step-by-Step
Navigating the insurance claims process can be challenging, but following a structured approach is crucial. Here’s a step-by-step guide to help you through the process:
Step 1: Notify Your Insurer Immediately
As soon as you discover damage to your property, contact your insurer immediately. Most policies have time limits for reporting claims, so prompt notification is crucial. You can usually notify your insurer by phone, online, or through a mobile app. Be prepared to provide basic information such as your policy number, address, a brief description of the damage, and the date it occurred.
For example, if a large tree branch falls on your roof during a storm, call your insurer as soon as possible. Delaying the notification could complicate the claim process and potentially lead to denial of coverage if you breach the conditions of your policy. Always document the time and date you first communicated with the insurer, as well as the name of the representative you spoke with.
Step 2: Document the Damage
Thoroughly document the damage with photographs and videos. This evidence will be crucial when proving the extent of the damage. The documentation also needs to demonstrate that the damage was caused by a peril that is covered. If possible, gather evidence of that peril. For example, if the damage was caused by flood, demonstrate the extent of the flooding. For damage caused by high winds, document the wind event (such as through weather reports) and the resultant damage to the house. Be sure to include:
- Detailed photos: Take close-up and wide-angle shots of the damage from various angles. Take as many photographs as needed to get full coverage of the damage.
- Videos: A video walkthrough can provide a more comprehensive view of the overall damage.
- Inventory: Create a detailed list of damaged or destroyed items, including their estimated value and proof of purchase (if available).
- Weather reports: Local weather reports can help establish weather events that may have caused the damage.
For instance, if a pipe bursts and floods your living room, take photos of the burst pipe, the water damage to the walls and flooring, and any affected furniture. Keep receipts from any emergency repairs or temporary accommodations. This documentation provides concrete evidence to support your claim.
Step 3: Take Reasonable Steps to Prevent Further Damage
Your insurance policy typically requires you to take reasonable steps to prevent further damage to your property. This might involve covering a damaged roof with a tarpaulin, boarding up broken windows, or extracting water from a flooded basement. Keep receipts for any expenses incurred while mitigating further damage, as these costs may be reimbursable. Failure to take these steps can potentially result in claim denial or a reduced payout.
For example, if a window is broken during a burglary, boarding it up promptly prevents further damage from rain or vandals. If you neglect to do so and additional damage occurs, your insurer might argue that you failed to mitigate the damage, and reduce your claim accordingly.
Step 4: Complete and Submit the Claim Form
Obtain a claim form from your insurer and complete it accurately and thoroughly. Provide all the required information, including the date of the incident, a detailed description of the damage, and supporting documentation such as photos, videos, and inventory lists. Double-check the form for errors or omissions before submitting it. Incomplete or inaccurate information can delay the claim process. Retain a copy for your records.
For example, some people mistakenly believe a policy will simply pay out for the damage; however, they must demonstrate the damage and its cause. If you suffered a burglary and have a policy providing coverage for stolen goods, you must provide a list of the stolen items along with their value.
Step 5: Cooperate with the Insurer’s Assessment
Your insurer will likely appoint an assessor to inspect the damage and evaluate your claim. Cooperate fully with the assessment process. Allow the assessor access to your property, provide them with any additional information they request, and answer their questions honestly. The assessor’s report will play a crucial role in determining the validity and value of your claim.
Often, the insurer’s assessor and your assessor will have different incentives. The insurer’s assessor is trying to reduce the amount it needs to pay out and your assessor is trying to get the most value for you. Ensure that you have good legal representation as they navigate this process.
Step 6: Review and Understand the Settlement Offer
Once the assessment is complete, the insurer will provide you with a settlement offer. Review it carefully and ensure that it adequately covers the full extent of the damage to your property. If you don’t understand something in the offer, ask your insurer to explain it to you in plain language. Don’t feel pressured to accept an offer immediately. Take the time to evaluate it thoroughly and seek professional advice if necessary.
For example, if the offer doesn’t account for the cost of compliance with current building codes or fails to include all damaged items, it may be insufficient. It is important to understand exactly what is being covered and what you are agreeing to.
Strategies for Disputing a Claim
If you believe your claim has been unfairly denied, underpaid, or mishandled, you have the right to dispute the decision. Here are some strategies to consider when pursuing a dispute:
1. Review Your Policy Again
Go back to your insurance policy and reread it carefully, paying close attention to the terms and conditions related to your claim. Identify the specific clauses that support your position and highlight any areas where you believe the insurer has misinterpreted the policy. Understanding the policy language is crucial when building your case. Remember that ambiguity in the policy language often falls against the insurer.
2. Gather Additional Evidence
If your claim was denied due to insufficient evidence, gather additional documentation to strengthen your case. This might include obtaining expert opinions from builders, engineers, or other professionals who can assess the damage and provide supporting reports. Collect any relevant receipts, invoices, or warranties that can help establish the value of damaged items. The more evidence you can provide, the stronger your argument will be.
3. Communicate in Writing
When disputing a claim, it is essential to communicate with your insurer in writing. This creates a clear record of all correspondence and ensures that your concerns are properly documented. In your written communication, clearly state the reasons why you disagree with the insurer’s decision, cite relevant policy clauses, and provide supporting evidence. Be professional and respectful in your tone, but firm in your position.
4. File an Internal Complaint
Most insurance companies have an internal complaints process that you can use to escalate your dispute. Submit a formal complaint to the insurer, outlining the details of your claim, the reasons for your dissatisfaction, and the resolution you are seeking. The insurer is required to investigate your complaint and provide a written response within a reasonable timeframe.
5. Seek Mediation or Independent Review
If you are unable to resolve your dispute through the insurer’s internal complaints process, you can seek mediation or independent review. Mediation involves a neutral third party who helps you and the insurer reach a mutually agreeable settlement. An independent review involves a qualified expert who assesses the merits of your claim and provides a non-binding recommendation.
6. Consider Legal Action
As a last resort, you may consider taking legal action against your insurer. This involves filing a lawsuit in court to seek a judgment in your favour. Legal action can be costly and time-consuming, so it is important to carefully weigh the pros and cons before proceeding. Consult with a lawyer who specializes in insurance disputes to assess the strength of your case and understand your legal options.
Understanding the Role of the EQC
The Earthquake Commission (EQC) plays a significant role in property insurance in New Zealand. The EQC provides natural disaster insurance for residential properties, covering damage caused by earthquakes, landslips, volcanic eruptions, hydrothermal activity, and tsunamis. Under the EQC Act, most residential property insurance policies automatically include EQC cover. For damage caused by landslip, storm or flood, only damage which occurs to land around your home, or to your home, is covered. Contents are generally not covered by EQC.
EQC Cover Limits and Processes
The EQC has specific cover limits. For example, the amount of cover it provides depends on when the damage occurred, due to various legislative changes (which often happen after significant natural disasters). These limits are normally less than the cost of reinstatement so it is crucial that your private insurance arrangements cover the excess (the amount above the EQC’s maximum amount). The EQC has a claim submission process that must be followed, which usually involved lodging a claim on their website and providing supporting information. It is only able to provide cover for the cost of the damage; there is no ability to obtain consequential losses, such as for stress or inconvenience.
Navigating Combined Claims with EQC and Private Insurers
In many natural disaster situations, you may need to file claims with both the EQC and your private insurer. For example, if an earthquake causes damage exceeding the EQC’s cover limit, your private insurer would cover the remaining amount, up to your policy limit. Coordinating these claims can be complex. Insurers may use different assessors, and each may have different requirements for documentation. Maintain detailed records of all communication with both entities and understand each organization’s role in your claim.
Essential Tips for Property Owners
To protect your interests when dealing with property insurance in New Zealand, consider these essential tips:
Review and Update Your Policy Annually
Insurance needs change over time. Regularly review your policy to ensure that the coverage limits are adequate to cover the current value of your property and its contents. Update your policy to reflect any significant renovations or additions to your home.
Maintain Detailed Records
Keep all insurance documents in a safe and accessible place. Maintain records of any communication with your insurer, including emails, letters, and phone call notes. Document all damage with photos and videos, and keep an inventory of your belongings with estimated values.
Seek Professional Advice
If you are unsure about any aspect of your property insurance, seek professional advice from an insurance broker, lawyer, or claims advocate. These professionals can help you understand your policy, navigate the claims process, and protect your rights.
Keep Your Property Well-Maintained
Proactive maintenance can help prevent damage and reduce the likelihood of a claim. Regularly inspect your property for potential problems, such as leaky roofs, cracked foundations, and faulty plumbing. Address these issues promptly to avoid more extensive damage.
Know Your Rights
Understand your rights as a policyholder under New Zealand law. Familiarize yourself with the Insurance Law Reform Act 1985 and the Fair Insurance Code. These resources outline your rights and the insurer’s obligations to you.
Frequently Asked Questions (FAQ)
Here are some frequently asked questions about navigating payout disputes related to property insurance in New Zealand:
What should I do if my insurance claim is denied?
If your insurance claim is denied, carefully review the denial letter to understand the reasons why. Gather additional evidence to support your claim, such as expert reports or additional photos. Then, formally dispute the denial with your insurer in writing, citing the relevant policy clauses and providing your supporting evidence. If necessary, escalate the dispute through the insurer’s internal complaints process or seek mediation.
How long does an insurance company have to settle a claim in New Zealand?
There isn’t a specific legal timeframe for settling claims, but insurers are expected to act with reasonable promptness and efficiency. The Fair Insurance Code requires insurers to acknowledge claims promptly, investigate them thoroughly, and make a decision within a reasonable time frame. Delays can occur due to complex investigations or external factors such as natural disasters increasing claim volumes.
What is an excess, and how does it affect my claim?
An excess is the amount you must pay out-of-pocket before your insurance coverage kicks in. For example, if your policy has a $500 excess and you file a $2,000 claim, the insurer will pay $1,500, and you are responsible for the remaining $500. Your excess affects the payout because it reduces the amount the insurer is obligated to pay. Selecting a higher excess means a lower premium, however, it also means that the minimum amount before the insurer will pay increases.
Can I choose my own builder for repairs?
In most cases, yes, you have the right to choose your own builder for repairs. However, some policies may require you to use a builder from their pre-approved network. Before making a decision, clarify this with your insurer. If you choose your own builder, ensure they are licensed, reputable, and provide a detailed quote for the work. Have the quote approved by your insurance company.
What if the damage to my property is caused by a natural disaster?
Damage caused by certain natural disasters such as earthquakes, landslips, volcanic eruptions, hydrothermal activity, and tsunamis is covered by the Earthquake Commission (EQC) up to certain limits. You will need to file a separate claim with EQC in addition to your claim with your private insurer who will cover the excess amount (above the EQC amount if the damage amount exceeds the EQC cap).
References
Insurance Council of New Zealand (ICNZ)
Earthquake Commission (EQC) Act 1993
Fair Insurance Code
Insurance Law Reform Act 1985
Navigating property insurance and payout disputes can be complex, but understanding your rights and following these steps can make the process smoother. Don’t hesitate to seek expert advice from insurance brokers, lawyers, or claims advocates. Take control of your insurance experience and protect your property with the right strategies. Evaluate your insurance policy today and ensure you are adequately covered!
