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Is the source of damage covered?

It’s important for customers to be aware that not all damage is covered by their house insurance depending on the source of the damage.

A fault in a house is often the cause of damage. For example old piping decays; causing a burst water pipe and water damage to the house. People often expect that all of the costs to have this fixed will be covered, but this is not always the case.

Initio’s house insurance policies has an exclusion for faults or errors in items. The full exclusion from the policy wording is set out below:


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.

Exclusions similar to this are common across house insurance policies in New Zealand.

 

What is Covered? – Resultant Damage

This means your insurance policy covers all the resultant damage of a fault at your house, but does not cover the repair of the fault itself. Insurance does not cover faults in design or deterioration as this is not an insurable risk.


Examples

1. Rusted pipe bursts and causes water damage throughout house:

Insurance will cover all the costs of repairing and accessing the resultant water damage from the burst pipe.

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 customer has to cover these costs. An insurance policy is not a property maintenance cover and home-owners are expected to front up the costs to replace old or faulty materials at their home.

2. Leaking hot water cylinder valve causes water damage to downstairs ceilings and walls:

Your insurance will cover the builders costs of repairing the walls and ceilings that has been water damaged. It will also cover any costs of reaching and stopping the leak.

However, the home-owner will need to pay for a new valve and the labour costs of installing it. Insurance will not replace a home-owners faulting items and the owner needs to cover this themselves.


To see an example of how a Hidden Gradual Damage claim payout is determined, please see here.

 

When Damage is not caused by a fault

Usually damage is not caused by a fault or error in the house, and claims payments are more straightforward. If someone crashed their car into your house or a storm rips apart your roof, the source of the damage is not a ‘fault’ and all the repairs cost can be covered.