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Hosting short-term guests introduces unique risks. Most insurance companies are cautious about rented holiday homes so before letting out your home or listing your property on platforms like Airbnb or Bachcare, it’s important that you confirm your policy covers holiday bookings.

Effects on insurance costs

If you host paying guests, and you tell your insurer, they will likely adjust your coverage. Be sure to inform your insurer about your hosting activities and understand the implications for your policy. Many insurers, including initio, may increase premiums or excesses due to the additional guest-related risk. Some insurers may exclude coverage for guests entirely, leaving you at risk of being uninsured. It’s best to review your policy or contact your insurer if you’re unsure.  Make sure your insurer is aware that you rent out your holiday home.

What qualifies as a holiday home, for insurance purposes?

To qualify as a holiday home, the owner must;

• Use the property themselves as a holiday home, and;
• Have the right to occupy the property at will, and;
• Store personal belongings at the home.   

A holiday home can be used by:

• The owner, at any time.
• Friends and family.
• Tenants on a periodic basis, including short-term paying guests (stays with durations of less than 90 days).  

These criteria ensure the property remains under your control and qualifies as a holiday home with your insurance provider and meets the requirements for cover provided by the Natural Hazards Commission (NHC, previously EQC).  

How property management can affect your insurance

Using a property management company under a full management contract can impact your insurance. If the property manager has full control, you may lose the right to occupy the property, which can disqualify it from being considered a holiday home, and makes it ineligible for Natural Hazards Commission (NHC) coverage.  You must check your agreement with your property management provider as it may mean that you have assigned control cover to the manager and you no longer have the ability to occupy it when you wish.  

An insurer cannot provide domestic house insurance cover for a holiday home that does not meet the conditions of cover for the NHC. 

Understanding NHC cover: The Natural Hazards Commission (NHC) provides special insurance protection for the home against natural disasters like earthquakes and floods, and unlike your house insurance policy, it also extends to cover land damage.  To qualify, your property must meet specific criteria, including being under your control as a holiday home. For detailed information, refer to the NHC guidelines.

What if your property does not qualify as a holiday home under the NHC legislation?

If your home does not meet the NHC definition of a holiday home, to obtain cover you will likely need a commercial property insurance provider to structure insurance that covers the building, loss of income and liability risk.  

Does landlord insurance cover short-term rentals like Airbnb?

No, our landlord insurance is designed for standard long-term residential tenancies only. It doesn’t cover properties used for short-term rental activity such as Airbnb or Bookabach.

If you rent out your own home (where you live) occasionally on Airbnb, you may be eligible for cover under our Own Home, Sometimes Rented policy. Similarly, if you have a family bach or holiday home that you occasionally let to paying guests, it may be suitable for our Holiday Home insurance – sometimes rented – just make sure to select the option for short-stay rentals when quoting.

Short-term rental properties that operate like a business typically require commercial insurance, which isn’t available through initio. Learn more about the things we don’t cover at initio.

Doesn’t Airbnb’s ‘Host Guarantee’ cover me?

If you manage your property using Airbnb, you’re likely familiar with their Host Guarantee.

It’s important to understand that this guarantee isn’t a substitute for proper insurance. The Host Guarantee comes with limitations and might not cover everything you anticipate. It’s not equivalent to regular insurance and some hosts have discovered it doesn’t provide comparable protection. To ensure your property is fully covered against any damages or issues, having your own insurance policy is essential.

Airbnb’s Host Guarantee is not a traditional insurance policy but a conditional promise. It’s not regulated like insurance. Key requirements include:

• Report damage and file a claim within 14 days.
• Provide proof of ownership and, in some cases, a certified police report.

House Guarantee conditions can include:

• Only covers damage during the booking period.
• Coverage is limited to listed areas in your profile.
• Exclusions include damage from excessive utility use, animals, or pets.
• Rent loss cover only applies to confirmed bookings cancelled due to damage.

Given these limitations, Airbnb themselves recommends having a specialist insurance policy in addition to the Host Guarantee.

Everything’s in order, how do I get the right cover?

If you manage your holiday home yourself and meet the necessary NHC criteria, initio offers specialised cover for your holiday home  that is also used for short-term rentals. As the first in New Zealand to provide a house insurance policy specifically designed for holiday homes, Initio offers a hybrid house, contents, and guest insurance policy tailored for short-term rentals, without the strict conditions of a Host Guarantee.

Initio’s holiday home (with the additional short stay option) policy covers:

• The home itself for damage from things like flood, fire and storm (whether rented or not) 
• Accidental damage to the home by guests.
• Intentional damage by guests, up to $25,000 (e.g., if guests decide to damage walls deliberately) .
• Loss of rent for confirmed bookings cancelled due to the home becoming uninhabitable following insured damage, and also for loss of rent from unconfirmed bookings based on seasonal, area or your previous year’s use data) 
• Meth contamination from manufacturing, ie. contamination damage caused by an accidental incident in connection with the manufacture, distribution or storage (but only where the storage is in connection with supply or distribution) of methamphetamine at the home.
• Your legal liability to your guests for accidental damage and bodily injury.

These are the sort of protections you need when renting your home out to short-term guests.

Key takeaways

• Check your insurance: Ensure your policy covers holiday rentals before using platforms like Airbnb.
• Higher costs: Be prepared for higher premiums or excesses if your insurance covers guests.
• Host guarantee limits: Airbnb’s Host Guarantee has strict rules and limited coverage.
• Property Management impact: A property manager’s control might disqualify your home from holiday home insurance, check your agreement with the property manager and that you still comply with the NHC definition of a holiday home.
• Holiday Home rules: You must retain occupancy rights and keep belongings there to maintain holiday home status.
• Get the right insurance: Choose insurance designed for short-term rentals for better protection.
• Comprehensive coverage: Seek policies that cover guest damage, lost rent, meth contamination, and liability.

By managing your property with these factors in mind, you can better protect your holiday home and maintain your insurance coverage.

Holiday Home Insurance
Holiday Home vs Own Home

Related articles

• How to claim for intentional vandalism by tenants
• Should I get a property manager?
• Second dwelling on your property that you rent out?
• Help when your quote isn’t ‘straightforward’
• Should you rely on the Airbnb host guarantee?

Landlord insurance is a tailored policy for a property used as a rental.  It is different to normal house insurance.  Landlord insurance covers both the rental (your house itself) and the additional risk added by having a tenant in the property.

All homeowners are exposed to common risks such as fire damage, flood, and earthquake, but as a landlord you face an additional occupancy risk due to a tenant living in the property.  Unlike family, tenants are not generally known to you.  

How is landlord insurance different from house insurance?

In short, landlord insurance is the same as insurance for your own home, but for two big differences:

• Disclosure – use of the property: 
  Landlord insurance specifically accounts for the fact that your family does not live in the property.  This is very important.  If your rental property burns down and your insurer is not aware that it is a tenanted property the insurer could be entitled to deny your claim. 
• Additional landlord risks:
  Unlike your own home insurance, most landlord insurance includes coverage to specifically address the additional landlord risks:  

What are my additional risks as a landlord?

Accidental damage by tenants

This is where your tenant un-intentionally causes damage to the property.  For example:  they spill a glass of red wine on the carpet.  In this situation you need a landlord insurance policy in order to have a successful claim.   It is unlikely that you can recover the cost of your insurance excess from the tenant.  

Deliberate damage by tenants

Deliberate damage, also known as malicious or intention damage is usually the case when, as a landlord, you discover holes in walls and damage that is unlikely to have been the result of an accident.  Cover for this is provided by a landlord insurance policy, usually up to a limit of around $25,000.  The cover protects you from the cost of a tenant deciding to make a mess of your property.  

Loss of rents following damage

If your rental property suffers a loss that deems the house uninhabitable then you face having an un-tenanted property while the repairs are completed and the property is occupied again.   This will mean a loss of rental income.  Landlord insurance provides cover for this loss of income up to a selected value (eg $40,000) for a payout period of usually 12 months.   For major losses the cover will stop as soon as the loss of rent amount is used or the payment period ends, whichever comes sooner.  

Loss of rents resulting from eviction or abandonment

This is where your tenant is evicted from the property (by decision of the Tenancy Tribunal) or your tenant leaves without giving notice.  In both situations it means that you will be out of pocket due to loss of rental income.  Some landlord insurance policies will reimburse you for this loss of income but only up to 6 or 8 weeks, following the formal eviction or discovery of the abandonment.  

Landlord contents damage or theft

Even an unfurnished rental property had landlord contents.  The oven and curtains are contents, not house.  The tenant risk means that you could suffer a loss to these items, and this risk increases when you partially or fully furnish a property.  A landlord insurance policy protects by providing cover, usually up to a standard limit of $20,000.   Some landlord insurers provide an option to purchase more contents cover for an additional cost, which is important for furnished properties.  

Landlord liability

As a landlord you accepting money (rent) for providing a house (accomodation).  This makes means that you are in the business and with this comes additional regulatory obligations that, if breached, can cost you.  Tenants can also have a go at you if they suffer a loss because of something you did (or didn’t do).  The best example here is if a landlord did not change the locks after a previous tenant abandoned it and the new tenant was robbed (with no sign of forced entry).   Some landlord insurance policies include cover for landlord liability, meaning that if you are pursued by a tenant or a regulatory authority the insurer use their lawyers to defend you, and if you are held liable pay certain awards against you.  

Meth contamination

Meth and other illegal substances can cause significant damage to a property, especially when the substance is being manufactured.   Meth clean-up costs can easily exceed $10,000.  Reducing the risk of contamination occurring is best managed through good tenant vetting procedures and meth testing in between tenancies.  If you do suffer a contamination loss and have a robust landlord insurance policy you will have cover for up to $30,000, plus the loss of rental income incurred.  

Can I hold the tenant responsible for damage?

Yes and no.  It really depends whether the damage was accidental, intentional, or just careless.  Having a good landlord insurance policy would mean you are covered for all the causes of damage by the tenant – and then your insurers will decide whether to go after the tenant for the repair costs.  

The good news is that the Residential Tenancies Act now provides scope for landlords (and their insurers) to recover the cost of repairs or their insurance excess from the tenant.   Learn more holding tenants responsible.  It is important to note that, more often than not, tenant damage claims result in the landlord’s insurer applying more than one excess.  This is because insurance works on incidents, and each incident is a separate claim that attracts its own excess.  Learn more about how insurers look at events

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Want more information?

Explore these additional articles that may interest you:

• Five fundamentals of landlord insurance
• Guide to landlord insurance
• Are you thinking of renting our your home and becoming a landlord?

Landlord Insurance is different to standard house insurance. It covers the house itself, and the extra risks you face being a landlord for standard long term residential rentals.

Homeowners are exposed to standard risks such as fire, floods, and earthquakes. Landlords are exposed to these standard homeowner risks, as well as the risks associated with renting to tenants.

What extra cover does Landlord Insurance provide?

Damage by Tenants Loss of Rents Meth Contamination Landlord Contents

Damage by Tenants

A standard house insurance policy might have cover for accidental damage caused by tenants, but will not cover intentional damage by tenants.

Intentional damage can come from your tenant punching walls, vandalising the property or throwing a raucous party. This is a common insurance claim for landlord’s, and can often prove costly.

Initio Tenant Damage Protection

Our landlord insurance policy provides full cover up to your sum insured for accidental tenant damage. You are also covered for intentional damage, vandalism or theft.

Damage caused by your tenant, paying guests, or any person who occupies the home (and any guest associated with these people) is covered.

Our policy covers up to $25,000 per event for intentional damage. Serious fire or explosion damage is covered over the $25,000 limit and up to your property’s full sum insured.

Loss of Rents

Rental income is essential to landlords.

If your rental is damaged and it can no longer be rented, you face both the costs to repair and the lost rental income you would have otherwise received. Standard house insurance will not cover loss of rents.

A landlord insurance policy will provide cover to rebuild your property, while also paying you lost rents if the home is unliveable while being repaired.

Tenant vacating without required notice or Eviction

Loss of rent can arise from scenarios beyond property damage.

It’s not uncommon for tenants to unexpectedly vacate their property or to be evicted due to non-payment if they fall 21 days behind. Additionally, there might be instances where tenants can legally cease rent payments under their tenancy agreement, such as when access to the property is prevented or essential utilities fail.

Should these issues arise, a comprehensive landlord insurance policy from initio protects against these losses. We cover rents for up to six weeks if your tenant leaves without the required notice or is evicted for non-payment. This coverage also extends to situations preventing access to the home or significant utility failures, ensuring a gap in rent doesn’t harm your financial security.

Property Damage

We cover up to 52 weeks of rents, or the loss of rent sum insured you select.

Insurance is triggered when there is physical damage to your rental that means it can no longer be lived in. A flood damaged house can take months or even a year to repair, so is essential for any landlord especially those with mortgage payments.

We include $20,000 loss of rent for free in all our policies. That’s $384 in weekly rent for a year, with options to increase this to $40,000 or $80,000.

Meth Contamination

Meth is rampant in New Zealand and landlords are particularly at risk. A badly contaminated house can cost tens of thousands of dollars to clean so that it can legally be rented again.

Specialist landlord cover is vital, as a standard house insurance policy will not cover meth.

This can come from consumption (smoking), or manufacturing. A meth infected house can be considered unsafe to live in and will be required to be de-contaminated to an appropriate level.

Landlord insurance will cover the costs of laboratory testing, and cleaning where there is a positive reading. The cleaning process can take months, so a landlord policy with loss of rent cover on top of cleaning cover is essential for managing your risk as a landlord.

Initio Meth Cover

We provide up to $30,000 of protection for meth testing and cleaning costs where a positive meth test has been found.

Loss of rent cover applies over and above the $30,000 of cover. We will pay out your weekly rents while your property is cleaned, for up to a full 52 weeks, or up to your loss of rent sum insured.

Landlord Contents

These days it’s common for landlord’s to rent their properties pre-furnished. This can include valuable belongings such as appliances, fittings and furniture.

Landlord insurance policies now provide bolt on cover or extensions to cover small amounts of landlord contents. This can either be included as standard or you can pay extra to include it.

Contents can be covered for their depreciated present value. A good landlord insurance policy will pay for new replacement items.

Initio Landlord Contents Cover

Our policy automatically includes $20,000 of landlord contents as standard.  This is a minimum amount covered by our policy for our landlord policy, for more kitted out properties there are options to increase this to $40,000 or $60,000.

This covers damage to your fittings in your rental, and can also cover theft of contents you include in the tenancy. Please note this applies to fixtures and fittings, but not your personal items.

We pay for a brand new replacement when the damaged item is no older than five years old. If the item is over five years old, we payout a present value replacement amount.

I have less than $20,000 worth of contents, can I reduce the amount?  No, the limit of $20,000 is standard to the policy, you will be covered for any chattels up to that figure automatically.

Does initio landlord insurance cover my rental property if it’s furnished or unfurnished?

Yes. Whether your rental is furnished or unfurnished, you’re covered.

Initio’s landlord insurance automatically includes cover for landlord contents – things like non-fixed appliances, curtains, rugs and heaters. If you fully furnish the property, you can opt to add extra contents cover for those items too.

Want more information?

Explore these additional articles that may interest you:

• Five fundamentals of landlord insurance
• What is landlord insurance?
• Are you thinking of renting our your home and becoming a landlord?
• What does landlord insurance cover?

If you have insurance on your house, you most likely have cover for fires. Unlike some countries, New Zealand house insurance policies automatically cover fires.

However, just to be sure you should check your policy wording to see if fire damage is not excluded. All of the initio house insurance policies automatically cover fires up to the replacement sum insured you select for your house.

Why is fire cover important?

Having fire cover for your home is essential. Fire damage makes up a large amount of house insurance payouts. Even a small fire that does not burn the entire house can mean it is a total loss. Smoke contamination and water damage (from the fire brigade) often means homes can’t be lived in and are a total loss.

The general risk of fires means it’s generally standard for cover to be included in insurance policies.

Kiwis are good at getting insurance

New Zealand has one of the best rates of insurance coverage in the world.  We are 4th in the global rankings of insurance penetration. This means that, as homeowners, we see the value in insurance and compared to other countries we choose to insure our houses (and other assets) more often.

Following the Christchurch earthquakes, almost every insurer changed from insuring houses for full replacement based on size (e.g. 150 square meters) to insuring the house for a specified replacement sum insured.  This put the onus on the homeowner to choose a sum insured that reflected the replacement value of their home – and this in itself is a complex exercise.  This resulted in the homeowner having a house insurance policy in place for less than it would actually cost to rebuild the house.

So, what is the rebuild value of a house?

Many homeowners confuse the rebuild value of their home or rental property with its market value.  These are two very different things and are completely unrelated.   The market value is what a property would sell for in the current market, whereas a rebuild value is a cost to replace the house and its site improvements.

Given that fire generally results in a total loss to the house, getting the rebuild value correct, and aligning this with your insurance is essential.  It is also important to factor in the cost of demolishing the home and preparing the site, the clean-up costs after a fire cost at least $40,000 (even more if there is asbestos).  Learn more about calculating your replacement value here.

Causes of house fires

The most common causes of a house fire are:

1.  Electrical fault
2.  Electronic equipment
3.  Cooking fires
4.  Fireplaces

Many fires can be prevented, or at least brought under control early if a fire extinguisher was available.  Unfortunately, unlike fire alarms, extinguishers are not mandatory.

What about older homes, do they burn down more often?

The earliest wiring in New Zealand was cloth-wrapped rubber insulated in metal conduit. It was designed for a very small number of power outlets. In the 1930’s rubber wrapped wiring (with an earth wire) was used without conduit. This wiring deteriorated as the rubber insulation perished and became brittle.   Many homes would have been rewired in the 1950’s and 1960’s with PVC or early versions of TPS wiring. This is also known to deteriorate over time, and wasn’t designed to be covered by insulation.  This is why older homes have a higher incidence of fire than new houses.

Homes today have more lights, electronics, gadgets, and appliances (including some that are permanently on standby) than anyone from the 1900’s could ever have imagined. The original wiring was not designed to handle this load and was not built to last.

Fire levies, how does that work?

The New Zealand Fire and Emergency Service is funded almost entirely by the levies included as part of asset insurance.  This money funds the fire stations, the employees, and the fire appliances that respond to house fires.  House insurance includes a levy of $146 inc gst per living unit.   Your insurer will collect this levy as part of your insurance cost and will then pass this on to Fire and Emergency Services on your behalf.  It is important to note that the fire service does not discriminate between payers and non-payers (insured and uninsured)  – meaning that if your house is on fire and you are not insured the fire service will still turn up and get your house fire under control.

How long does it take to rebuild a fire damaged house?

Do not underestimate the amount of time it takes to rebuild after a fire.  You will be waiting for at least 3 months for fire investigators, assessors, engineers, builders and environmental consultants to complete their reporting. and cost estimation.  If your house is suspected to have Asbestos then the process will take even longer while professionals confirm that the property is safe.

The next step is compliance which means delays on consents with council – adding further time to the process.  It could take as long as 6 months before re-construction starts, and depending on the complexity of the build at least 4 months of construction through to completion.

If you are a landlord it is important that your landlord insurance policy has loss of rents cover – which will compensate you for the fact that the tenant has left the property and is no longer paying rent – this could be important if you have a mortgage on the property.

If it is your own home that has been fire damaged and cannot be lived in (which is almost a certainty after a fire) then you will be wanting your home insurance policy to have an alternative accommodation clause; meaning the insurer will pay the costs of your renting another property while your home is being rebuilt.

Tips for making sure you will survive a fire loss to your house:

• Do not under-estimate the cost of fire damage
• Work out the re-build value of your home and update your insurance policy.   There are tools to help you calculate this value
• Fire damaged houses take a long time to rebuild – make sure your house insurance policy allows for this.

Learn more about the different types of house insurance:

Landlord insurance – all in one house and landlord insurance, including loss of rents, malicious damage & more.
Multi unit insurance – for serious landlords with multiple units under the same roof.
Holiday home insurance – for the bach and for holiday homes that are also rented out (eg Bookabach, AirBnB)
House insurance – for your own home, and contents.

For many people, insurance is the ultimate grudge spend. Along with council rates it typically represents one of the most significant expenses associated with home ownership.

Because of the intangible nature of insurance, and its status as everyone’s most hated expense, the insurance industry often gets a bad reputation from the public. Currently, the insurance industry in New Zealand is facing all-time lowest levels of trust among the general public. Here at initio, we are challenging this and the traditional practice of insurance by making insurance easier and more accessible.

To help increase the trust we thought we would break-down the top house insurance myths we encounter:

1. “I have paid my premium, why do I have to pay an excess?”

A common grievance towards insurance companies arises from the customer’s responsibility to pay their excess come claim time. It may seem unreasonable to have to contribute the excess cost towards your claim when you have already paid for your premium. However; there are good reasons that insurance companies will charge an excess:

a) To avoid small claims

If there was no excess on insurance policies then people would rightfully be able to lodge small claims (think $80, $50 or even $10) that would make up a significant portion of total claims. Management, payment, and processing of claims is one of the largest operating costs of an insurance company.  For example, for most clunky insurance companies to process a $150 claim, is more than the value of the claim itself.  A high volume of such small claims would bloat the expenses for the insurance company, ultimately resulting in higher premiums for customers. Charging a minimum excess is the insurance company’s way of keeping premiums down while making sure they are covering the important stuff – not every broken toy or sock lost in the washer.

b) As a measure of self-insurance.

Insurers also give the option to customers of a higher excess above the minimum. This is a means of self-insurance where those that are more willing to cover additional costs towards a claim can get a reduction in premium via an increase in their excess.  Initio for example provides the option of a $2,000 house insurance excess – which was as a result of customer feedback.

2. “Insurers will screw you over with the fine-print”

Whether it’s from a bad claims experience, or a general distrust for insurance companies – people often hold a grudge against insurers. Customers often think insurers are looking for a way out of paying  claims and that they will use the fine-print to do it. This may reign true, however will usually reference back to conditions included in the policy wording – and hence the insurance agreement.

The problem isn’t the fine print, the policy wording didn’t change from when the cover was started.  The argument is more around the interpretation of the policy and we are the first to agree that this isn’t always straightforward.  Policy wordings need to get rid of the jargon and be written in plain english.

At initio, we are taking the Reserve Bank’s (New Zealand’s Financial Regulator) recommendation for clearer, more understandable insurance very seriously. We have prioritised easy to understand policy wordings, compiled to clearly show details of our customers cover, and published real life examples of claims we have paid and scenarios that are not claimable.

Whilst we don’t expect everyone to read each policy wording back to front, there are parts of our policy that are very important to be known to the customer. Therefore it is important for people to take time to get familiar with the useful policy information we provide so that they are not left surprised with unexpected conditions in the event of a claim.

To read our full Home and Contents policy wordings please visit the following links:

Home Insurance

Contents Insurance 

For a useful comparison between our policy wording and other covers across popular insurers in New Zealand, visit https://initio.co.nz/#comparison

3. “Insurance companies are just there to make profit not friends”

Perhaps the most truthful stereotype we hear is that people believe insurance companies are there to make money. While this is true; companies have an obligation to shareholders to return a profit, they also have an obligation to pay claims. If insurers were forced to pay out the same amount that they received in premiums and were essentially not there to make money, no insurance companies would exist. Like any business there are various operating costs for an insurance company that include managing claims, administration costs, reinsurance (insurance for insurance companies) and many more.

An insurance company will aim to adjust their price and policy so that the amount paid out for claims is less than that received in premiums. The proportion of this is called the insurer’s ‘loss ratio’. Historically, a domestic house insurer might set up their strategy and pricing to aim for a loss ratio of 60%. Then once the costs of operating the company (including significant re-insurance costs for widespread earthquake losses) are deducted, an approximate profit margin of 3-8% on the original premiums received might be earned by the insurance company – although this varies based on good and bad years.

When you purchase insurance you are buying a product that gives you peace of mind that you are covered when disaster strikes. Like any other product you buy, the seller needs to make a profit to survive.  Effectively with insurance you are pooling your premiums with other customers to receive protection should something go wrong.  The insurance company is the administrator of these funds and takes the risk (and the margin) of doing so.

4. “You’re better off not bothering with insurance and having your own emergency fund”

Perhaps a myth popular with those who most distrust insurance companies is that you are better off forgetting about insurance completely and putting away the money you save on premiums each year into your own ’emergency fund’. This is the most extreme case of self-insurance. This could certainly be a practical solution for the most disciplined people with a comprehensive approach to reducing their risk. However, there are some obvious pitfalls and major challenges to this approach.

You are likely to experience several years where you are effectively un-insured while you build up your fund. After a number of years have passed you might have saved enough to adequately cover minor losses. However, it will take many many years; if not your whole life, to accumulate enough for a worst case scenario loss.  If you put aside $1,500 a year for 50 years at current interest rates you would save $127,000, which seems reasonable, but when you adjust for inflation, that $127,000 only represents $47,000 of todays money.   Would that be enough to replace your home and contents in a total loss fire? And could you trust yourself not to ‘borrow’ from the fund? The decision to take out insurance can have a life changing effect on you in the event of a disaster – for the better or the worse.

Remember that when you purchase insurance, not only are you buying cover when things go wrong – but you are obtaining piece of mind to enjoy a less stressful life.

Useful articles

• Top five mistakes to avoid when insuring property
• Five fundamentals of house insurance

As a homeowner in New Zealand, you may have noticed fluctuations in your house insurance premiums over the years. While factors such as the rebuild cost of your home and the frequency of local weather events play significant roles, there’s another crucial element influencing your home insurance pricing: the global pool of insurance funds.

To put this into context, consider your personal insurance excess, which might be $650 for your house. In comparison, IAG has a $500 million excess for covering multiple homes in New Zealand in the event of a disaster. Similarly, while your house might be insured up to $1 million, IAG’s reinsurance limit is $10 billion. Although this is a simplification, it helps explain how reinsurance works.

The key takeaway here is that initio and IAG ensure you are well-covered. For more details, you can read the official article from IAG here.

New Zealand: A high-risk country with a small pool

New Zealand is one of the highest earthquake-risk countries in the world, situated within the volatile “Ring of Fire.” This inherent risk, combined with our relatively small population, means we draw from a comparatively smaller pool of insurance funds than larger nations. Consequently, our home insurance market heavily relies on global reinsurance companies to provide additional coverage and spread the risk.

New Zealand’s high exposure to natural disasters like earthquakes, floods, and cyclones makes it one of the riskiest countries for insurers. This, coupled with our small population and insurance market, underscores the importance of attracting global reinsurers to provide essential coverage.

For reinsurers to support the New Zealand market, it must be a worthwhile proposition. They carefully assess the risk-reward balance, considering factors such as the frequency and severity of past events, the potential for future catastrophes, and the insurance penetration rates in the country. If the risks outweigh the potential returns, reinsurers may limit their exposure or demand higher premiums, ultimately impacting the cost of home and contents insurance for New Zealanders.

What is a reinsurer?

A reinsurer is essentially an insurance company for insurance providers. When an insurance provider issues policies to customers, it takes on the financial risk associated with potential claims. To manage and mitigate this risk, the insurance provider may seek additional coverage from a reinsurer.

Here’s how it works:

1. Risk transfer: The insurance provider transfers part of its risk to the reinsurer. This process is known as “reinsurance.” By doing this, the insurer reduces its exposure to large or unexpected claims.
2. Premium payment: In exchange for taking on this risk, the reinsurer charges the insurance provider a premium. This premium is typically lower than the total premiums collected from policyholders, allowing the insurer to maintain profitability while securing additional risk protection.
3. Financial stability: Reinsurers help insurance providers maintain financial stability, especially in the face of large-scale disasters. For example, if a major earthquake occurs, the financial burden of the claims is shared between the insurer and the reinsurer, ensuring that the insurer can meet its obligations to policyholders.
4. Global risk distribution: Reinsurers operate globally, spreading risk across different regions and types of insurance. This global reach allows them to balance their portfolios and better manage the financial impact of claims from catastrophic events.

The importance of reinsurers

Reinsurers play a crucial role in the insurance industry by providing a safety net for insurance providers. This enables insurers to offer coverage to high-risk areas, such as New Zealand, which is prone to natural disasters like earthquakes, floods, and cyclones. Without reinsurance, insurers might be unable to cover such risks or would need to charge prohibitively high premiums.

Reinsurers enhance the capacity and resilience of the insurance market, ensuring that policyholders receive the protection they need, even in the event of significant and unexpected claims.

Global events and local insurance impacts

While major weather events or natural disasters overseas may not directly impact New Zealand, they can still influence home and contents insurance pricing locally. For example, when hurricanes, earthquakes, or wildfires strike other regions, reinsurers must divert funds to cover those losses. This depletion of the global insurance pool can lead to higher reinsurance rates, which local insurers must then pass on to their customers through increased home insurance premiums.

During hurricane seasons in the United States, insurance companies often raise their premiums due to the increased risk. This increase is subsequently passed on to reinsurers, making the US market more attractive to them compared to New Zealand. Reinsurers get a better return on their investment in the US market due to higher premiums and a larger risk pool. It’s also important to note that the IAG program covers both Australia and New Zealand, which makes it relatively smaller compared to the US market.

It’s not just the overseas events that can impact your house insurance pricing. Local factors can also have significant consequences. The devastating floods and cyclones of 2023 led to substantial claims and higher reinsurance costs for local home insurance providers.

The impact of regulation on pricing

New Zealand’s prudential regulation, particularly since the 2020 review by the Reserve Bank, has significantly impacted the cost of house insurance for homeowners. Most insurers globally have to hold sufficient reinsurance or capital reserves to cover the risk of a 1-in-200 year catastrophe event. However, New Zealand insurers must hold sufficient reinsurance or capital reserves for a 1-in-1000 year catastrophe event. This stringent requirement drives up the cost of reinsurance, which, in turn, increases the cost of insurance for homeowners.

Balancing risk and affordability

Insurers and reinsurers are constantly reassessing their risk appetites, pricing, and capacity in response to global and local events. While this process aims to ensure the sustainability of the home insurance industry, it can result in higher premiums for homeowners. However, it’s a necessary measure to maintain the availability of home insurance coverage and spread the risk equitably across the global pool.

Enhancing New Zealand’s reinsurance market

To make our market attractive to global reinsurers, it’s essential to maintain a robust and well-regulated insurance industry with adequate pricing and risk management practices. Initiatives like the new disaster response model between insurers and the Earthquake Commission (EQC) aim to improve efficiency and customer experience, potentially enhancing New Zealand’s reputation in the global reinsurance market.

By demonstrating our commitment to responsible risk management and ensuring a fair return for reinsurers, we can continue to secure the necessary backing to protect New Zealand homeowners against the risks we face in our hazard-prone environment.

Making informed decisions 

As a homeowner in New Zealand, understanding the interconnected nature of the global insurance market can provide valuable insights into the factors influencing your home and contents insurance costs. By staying informed and working closely with your home insurance provider, you can make well-informed decisions to ensure you have adequate protection against the risks we face in our beautiful but hazard-prone country.

When choosing house insurance in New Zealand, it’s essential to know that initio is backed by industry giant IAG. This partnership ensures our financial stability and capability to pay claims, providing you with peace of mind. We understand that the most important aspect for our customers is knowing that we have the financial strength to support them in times of need.

By partnering with a financially robust provider like initio, you can rest assured that your most valuable asset is protected, even in the face of unexpected events.

Useful links

• Why has my premium changed?
• How are house insurance premiums calculated?
• Am I covered for natural disasters?
• IAG confirms reinsurance protection

There’s a lot to juggle when you’re buying your first place – deposits, lawyers, moving trucks, the lot. Sorting out home insurance when buying your first house is another step, but it doesn’t have to be confusing.

That’s why we created the First Home Buyer Insurance Guide. It explains what house and contents insurance is all about, answers the questions first-home buyers ask most, and helps you avoid common mistakes.

You’ve got enough to think about. We’ll make insurance the easy part.

When do you need insurance?

One of the biggest surprises for first-home buyers is when insurance is actually required. Most banks won’t release your loan until they’ve seen confirmation of cover. You can’t leave it until after settlement.

Here’s how timing works:

• Auction: Check in advance that the property is insurable before bidding.
• Conditional offer: Your finance clause usually requires proof (Letter of Intent or Certificate of Insurance).
• Settlement day: Even with an unconditional offer, you’ll want cover active from the moment you take ownership. Learn more about when your cover needs to begin.

Sorting your insurance early gives you peace of mind and avoids last-minute stress.

Proof of cover: two simple options

Letter of Intent

Best when you’re still finalising the purchase or need something fast. Get a quote online, customise your cover, and download the Letter of Intent instantly to show your lender the property can be insured.

Certificate of Insurance

Once you’ve bought the home, complete your sign-up, pay your premium, and receive the Certificate of Insurance by email. This confirms your cover is active from settlement day. All you need is your new address – no phone calls, no delays.

What to look for in your policy

Insurance isn’t one-size-fits-all. Before you buy, think about:

• Sum insured: The rebuild cost of your home (not the market value). Include demolition, site clearance, and GST. Use our calculator to help you estimate the rebuild cost.
• Excess: What you’ll pay if you make a claim. Higher excess lowers premiums but increases out-of-pocket costs.
• What’s covered: Fire, flood, storm, burglary, accidental damage, and natural disasters.
• What’s not: Wear and tear, gradual damage, or maintenance issues.

And don’t forget contents cover – your furniture, electronics, and valuables add up quickly.

Mistakes first-home buyers often make

It’s easy to treat insurance like a box to tick, but the wrong choice can leave you out of pocket. Common mistakes include:

• Underinsuring: Cutting corners on your sum insured lowers premiums but leaves you short if disaster strikes.
• Guessing rebuild costs: Use a calculator or valuation instead of rough estimates. Learn more about calculating rebuild costs.
• Chasing the cheapest price: Low-cost policies often have gaps in cover or poor claims support. Use our online comparison tool to compare cover options between leading NZ insurance providers.
• Picking the wrong excess: Balance affordability with what you could realistically pay. Learn more about insurance excess
• Forgetting contents and car cover: Protecting your house is step one, but your belongings and car matter too. Access our contents calculator tool to work out the value of your belongings.

Why initio works for first-home buyers

You don’t just need cheap insurance – you need cover that works when it matters. That’s where initio comes in:

• Instant quotes and proof of cover online
• Thousands of verified 5-star reviews
• Transparent, fast claims process you can manage online
• Backed by IAG, New Zealand’s largest general insurer
• Policies designed for Kiwi homeowners and landlords

We built initio to take the hassle out of insurance. No hold music. No confusing forms. Smart cover made simple.

Ready to get started?

Read the full First Home Buyer Insurance Guide for step-by-step instructions, examples, and practical tips to help you get it right from the start.

Make insurance one less thing to stress about – so you can focus on enjoying your new home.

Ready to begin your journey with initio? Start with a quote

Related articles

• • Moving house? Things you need to know about your insurance.
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  • How to switch from your current insurance provider to initio

Want to dive deeper?

Watch our video where Guy, our Head of Partnerships, explains what insurance actually does, why banks care about confirmation of cover, and how to avoid common traps as a first-home buyer.

If you’re doing alterations or renovations to your house you might be wondering if you’re covered by your initio house insurance policy.

Depending on the works involved you may need to arrange a Contract Works policy, also known as ‘construction insurance’ or ‘ builders all risks’ cover. Initio does not currently offer this type of cover, but you can obtain it through a contract works insurance provider, such as Builtin Insurance.

Who arranges the cover?

If you’re doing an alteration, renovation or work to your existing house, it’s generally your responsibility to arrange construction cover.

For a new build, full contract works cover is required, and is usually arranged by your builder.

Works that don’t require Contract Works cover

Cosmetic Renovations

If you are doing cosmetic renovations to your house (with no structural alterations) you don’t need a contract works policy.  Generally your house insurance policy (including the initio house insurance policies) will cover damage that occurs during the works.

What is considered ‘Cosmetic Renovations’

Cosmetic renovations are work that doesn’t involve structural alterations or changes to the house. Cosmetic renovations that are covered by a standard house insurance policy include:

• Painting
• Installing new carpet
• Replacing a toilet
• Removing non-load bearing walls

If you spill paint on your carpet while renovating, there’s cover to fix the stain. This is not considered structural construction related damage, so your standard house cover will respond.

Works that require Contract Works cover

Structural Alterations

If your work involves any structural alterations to your house, you will need a separate contract works policy to have cover for construction related losses to the existing house, and for the new work itself.

Your existing house insurance policy will stay in place to cover non-construction losses (e.g. an earthquake), and your new contract works policy will provide cover for damage to the:

a) New work (e.g. the new garage being built, or the new roof), and

b) Existing house for construction related risks (e.g. storm damage while roof repair is half complete) – please be sure to include this section on any contract works cover taken

A standard house insurance policy will not cover these risks.

People are often confused about when contract works is required, and what it covers.

What is considered ‘Structural Alterations’

Some examples of structural changes include:

• Re-roofing
• Building a new extension to the house
• Removing a load-bearing wall
• Re-cladding

It’s works that involve changes to the supporting parts of the house (e.g. bearing walls, beams or floor construction), or the weather tightness of the house (e.g. cladding and roofing). These require construction cover and a house insurance policy can’t be relied on to assist.

If you need contract works insurance, we’ve partnered with Builtin to offer you a suitable solution. Like initio, BuiltIn are underwritten by IAG so this means that you will have the same ultimate underwriter for the house and contract works risk, which is important.

Still unsure if your works are structural? Contact us and we will let you know, or contact your insurance company.

What if I do structural work but don’t get Contract Works cover?

Essentially you’re taking the risk of damage to the new works, and any construction related losses to your existing house not having cover.

This will only be covered by a contract works policy, and are excluded from your house insurance cover (see below).

Causes of loss not covered

You are not covered for loss to the home connected in any way with:

• Structural additions or structural alterations
• Water in any form (including hail and snow) entering the home because any roofing material, exterior cladding, window or door has been removed by: (a) you, or (b) any other person who is acting on your authority, or

Construction related losses that would require contract works cover (Examples)

1. 1. • Builder puts nail through water pipe, causing internal flooding.
      • Blowtorch catches fire on wiring and house extension is fire damaged throughout.
      • Builders were replacing roof, and strong storm winds ripped roofing off when it was half complete.
      • Roof trusses collapse when builders removed load bearing wall

Note that these all relate to the construction work, and cause damage to the contract site being the existing structure of the house.

Consider your Risks

It’s up to you to decide if you need contract works cover. While there’s always an element of risk with structural works, you might be happy not to have cover if you think the risk and severity of damage is low.

You should consider the price of contract works cover and the peace of mind provided. Premiums start at around $500 premium for a small project. The longer the works take, the more expensive the policy will be.

My builder has liability cover, why do I need contract works?

Most builders will have some form of their own liability insurance.  Don’t be fooled – this is not a form of contract works insurance.

What does a builder’s Public Liability cover?

It covers them for accidental damage to other people’s property they are held liable for. For example, the builder walks in the house with paint on his shoes and damages carpet.

Note that a builder cannot be held liable for something they didn’t cause (unless they are grossly negligent). If an earthquake or storm damages your work, your builder will not be to blame.

Most public liability policies also exclude property being worked on. In most cases your house is the product (so it’s unlikely there’s cover if the builder causes damage).

The upshot is you shouldn’t rely on your builders public liability policy as an alternative to contract works insurance.

Disclaimer: This support article is a guide only. It is not intended as specific advice for your situation. It is general guidance only.  Consult your insurer/provider if you have specific queries relevant to your specific situation.  

Related Articles:

• Take the house flip insurance quiz
• Are Renovations or Extensions to my home covered?
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• What is covered by a house flip insurance policy?

As you pay for your insurance you might wonder where your premium is going? And how is it calculated? This guide explains what makes up the cost of house insurance and how it’s calculated.

Insurer Premium

This is the insurers cut of the pie and is what the insurer receives in compensation for taking on the risk that you don’t want to carry yourself.  This is the variable component of the overall premium which will be higher for riskier properties and lower for a less risky property.

For example, a premium comparison between a landlord insurance policy for a rental property located in Auckland and one located in Christchurch will show a significant difference in premium.  This difference in premium is due to the risk exposure to earthquakes. However, there are many factors that determine the premium of your property – such as the relative exposure to weather events, flood zones, vulnerability to theft and the historical record of claims in the area.  

In short, insurers use the following factors to calculate what premium they want for the risk.

a) Location of your property

The cost of your insurance is mostly based on how likely it is that your area will have an earthquake or storm. Some places are more at risk than others because of past claims. Nowadays, many insurance providers use “risk-based pricing.” This means areas with less risk, like Hamilton, no longer help cover the cost for higher-risk areas like Napier.

b) Water supply or distance to fire station

The closer a house is to a fire station and the better the access a property has to water, the less likely it is to burn to the ground. For example, a rental property immediately next to a fire station will have a lower premium than a rental property that’s 30 minutes out of town and has rainwater tanks for its only form of water.  

c) Age of the property

Houses built prior to the 1940’s are more likely to have older building materials and methods. A common cause of damage are electrical fires caused by old and corroding wiring. Water damage from by old pipes failing under increased town water pressure is also common. Learn more about insuring older homes here.

There are also certain decades where the New Zealand construction industry (and the Government) allowed the use of certain plumbing products and cladding systems that continue to be a source of significant property damage. Houses built in the 1980’s are most likely to be constructed with Dux Quest piping and fittings. Quest was taken off the market in the late 1980s but there are still a number of houses suffering water damage from poor performance of water pipes and fittings.  

d) Use of the property

This one goes to human nature. It’s a fact that people take better care of things they own. This means that houses occupied by their owners have few losses than those occupied by tenants or short staying guests. A rental property attracts landlord risk (such as malicious damage and loss of rents) so a landlord insurance policy will cost you more than the insurance cost for your own home.  

Holiday homes are often empty for longer periods of time. This can make water damage more expensive to fix. There’s also a higher chance of break-ins and burglary.

e) Replacement value of the property

The more your house is worth, the more you’ll pay for insurance. But it’s not as simple as saying a $1,500,000 house costs twice as much to insure as a $750,000 one. After a certain point, the cost of insurance goes up more slowly. This is because most insurance claims are for small things, like a leaking pipe, rather than big things like a house fire.

f) Excess and extras

An excess is the amount you’re willing to pay when you make a claim. The more you agree to pay, the less risk for the insurance provider, especially for small, frequent claims.

Adding extra types of cover can also make your premium go up. For example, if you decide to increase your ‘loss of rents’ cover, you’ll pay more.

Government Earthquake Levies

Your insurance cost includes a government earthquake levy. This money goes to the New Zealand Natural Disaster Fund. It covers natural disasters, like earthquakes, up to $345,000 including GST. Since October 1, 2022, this levy has gone up to $552 including GST for each home covered by your insurance each year.

If an earthquake happens, the first $345,000 of damage is paid for by the Earthquake Commission. Any amount over that is covered by your insurance provider. We collect this levy as part of your total insurance cost and give it to the Earthquake Commission.

Government Fire Service Levies

Your insurance also includes a fire and emergency service levy. This helps pay for emergency services like fire brigades and ambulances that benefit everyone in New Zealand.

This levy is $106 + GST for each living unit, and an extra $21.20 + GST if you also have cover for contents. Like the earthquake levy, we collect this money as part of your total insurance cost and give it to the Government. Even if you choose not to have home insurance, you’ll still benefit from these services.

Goods & Services Tax

Like all domestic goods and services in New Zealand, a 15% GST tax is then applied to the total insurance cost (insurer premium, NHC (was EQC) levy, and FSL levy). The total of all four of these makes up the total premium payable by you, the insurance customer.  

As a practical example, a single unit landlord insurance policy with a total annual insurance cost of $1,000 including GST consists of 55% government levies and GST.

Where can I find the breakdown?

On our quotations and options of renewal, you can find the breakdown immediately below the monthly and yearly total cost figures.  If you hover over the coloured bar, the system will display each relevant amount.  Once you purchase a policy a receipted Tax Invoice will be emailed to you which outlines the full breakdown.  Historical Tax Invoices can also be downloaded from your initio dashboard at anytime.

This guide has been produced to provide more transparency on how insurance premiums are calculated.  Much of the way the insurance industry operates is a ‘black box’ of jargon – but when it comes to something so important as the cost of house insurance it shouldn’t be complicated. 

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