Is the cause of damage covered?

Not always. Home and Contents insurance policies typically exclude the repair of a fault, defect, or deteriorating building component. These are considered maintenance issues, not insurable events.

Key takeaways

• Insurance may cover the resulting damage caused by an event, even if the item that caused the damage is not covered.
• The cause of damage and the resulting damage are assessed separately when considering a claim.
• Damage caused by gradual deterioration, wear and tear, faulty materials or lack of maintenance is generally not covered.
• The cost to repair or replace the item that failed may not be covered, but resulting damage may still be covered if it meets the policy terms.
• Each claim is assessed based on the specific circumstances and the wording of the policy.
• Understanding the difference between the cause of damage and resulting damage can help explain why some parts of a claim may be covered while others are not.

Insurance is designed to cover the result of something going wrong, but not the cause of damage itself. For example, an old pipe decays and eventually bursts, causing water damage to the house. Homeowners often expect that all of the costs to have this fixed will be covered, but this is not always the case.

House insurance policies generally have an exclusion for faults or errors in items. A common exclusion a homeowner would find in their policy is:

You are not covered for loss, cost or expense arising from the fault, defect, or omission on:

1. design, plan or specification, or
2. workmanship, construction or materials.

However, this exclusion applies only to the property directly affected, It does not apply to resultant damage and accidental loss to other parts of the property.

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So, when is the cause not covered? (Examples)

• Rusted pipe bursts and causes water damage throughout the house – Insurance will cover all the costs of repairing the water damage, e.g., carpets, walls, and redecorating. However, the costs to repair and replace the rusted pipe are not covered. This is deemed a fault in the materials due to the old age of the piping.  The homeowner is responsible for this cost. An insurance policy is not a property maintenance cover and homeowners are therefore expected to pay for the costs of fixing faulty or old materials at their home.

• Leaking hot water cylinder valve causes water damage to downstairs ceilings and walls – Insurance will cover the builder’s costs of repairing the walls and ceilings that have been water-damaged.  It’s important to note here that many policies have a hidden gradual damage limit of between $1,000 and $3,000. However, the homeowner will need to pay for a new valve and the labour costs of installing it.

To learn more about Hidden Gradual Damage, read our detailed guide

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When is the cause of the damage covered? (Examples)

The crucial factor when working out what is covered, is determining the specific cause of the loss.  If the cause is external to the house and is not related to the direct failure of something in the home (a water pipe for example) then everything, including the cause will be covered.

• An overnight freeze in temperature causes a water pipe to crack – Water damage occurs to the walls and flooring. Insurance will cover the cost to repair all of the resulting damage, and it will also cover the cracked pipe because the crack was caused suddenly by freezing. The cause of the loss isn’t the pipe failing on its own — it’s the sudden low temperatures. Because of this, the pipe itself is treated as resultant damage.

• A wind storm blows part of the roof off the house, rain follows, causing water damage – Again the key difference here is that the damage has been caused by something external and unrelated to the roofing itself.  All damages including the repair to the roof and the subsequent water damage will be covered by a house insurance policy.  If the roof had simply started leaking by itself (which is relatively common for older houses with original roofs), the the cost to repair the water damage (eg new gib ceiling and insulation) would be covered by house insurance but the repair to the roof would not.

• A power surge causes both the switchboard to catch fire, and it damages appliances – All damage is covered by insurance as the cause of the loss was not a faulty switchboard but rather an electrical spike that was an external event.

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Frequently asked questions

What is the difference between the cause of damage and resulting damage?

The cause of damage is the event or item that creates the problem, such as a failed pipe or leaking appliance. The resulting damage is the damage caused by that event, such as damage to flooring, walls or contents.

Does insurance cover replacing old or worn-out items?

No. Insurance generally does not cover replacing items that have failed because of age, wear and tear, deterioration or lack of maintenance.

Why isn’t the cause of damage always covered?

Insurance is designed to cover unexpected events and resulting damage, rather than the cost of maintaining, repairing or replacing items that have worn out or deteriorated over time.

Articles of interest

• Am I covered for pet damage with initio insurance?
• Can more than one excess apply to a claim?
• How to claim for accidental damage

 

Written by Megan Fisher. Initio’s Head of Marketing

Megan has been with initio since 2022 and creates customer-focused content that helps New Zealand homeowners and landlords understand insurance in plain English. She works closely with initio’s claims, customer support, and development teams to make sure content is accurate, useful, and easy to follow. She has more than 20 years of experience in marketing and product strategy.