New Zealand's Approach To Earthquake Insurance

New Zealand has a unique partnership between the government's Earthquake Commission (EQC) and the insurance industry, which sees the Crown act as the insurer of first resort for earthquakes. The EQC provides the first layer of coverage for 1.84 million residential properties across the country, with the private market delivering cover over this initial layer. EQCover, the EQC's natural disaster insurance, is automatically included in most home insurance policies. It covers residential homes and some areas of residential land against loss or damage from earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, and tsunamis.

EQCover insurance

EQCover insures your home and some areas of your residential land against loss or damage from earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, and tsunamis. It also covers your residential land (within limits) against storm and flood damage. It's important to note that your home insurance policy does not cover your land.

In the event that your home is damaged by a natural disaster, the EQC will pay the cost of repairs covered by EQCover up to the maximum EQCover amount. If the cost of repairs exceeds this amount, your home insurance policy will cover the remaining cost up to your sum insured. As of October 1, 2022, the maximum EQCover amount is $300,000 (+GST), and the maximum EQC levy is $480 (+GST).

EQCover provides the first layer of insurance cover for your home and limited cover for your land. This means that if your home is damaged by a natural hazard event, you may need to carry out urgent repairs to ensure your home is safe. EQCover can contribute to the cost of these urgent repairs, as well as the cost of cleaning up your land after severe weather events such as storms or floods.

To make a claim for EQCover, you should contact your insurer, who will assess and manage your claim, including the EQCover portion on behalf of the EQC. Your insurer will be your single point of contact during the claim process and can answer any questions you may have.

Natural Disaster Fund

The New Zealand Natural Disaster Fund (NDF) is administered by the Earthquake Commission (EQC) and is funded by monies received from private insurers, from a flat-rate levy imposed on all households that purchase homeowner insurance. The EQC is also responsible for investing the fund and ensuring there is adequate reinsurance cover available.

The NDF provides financial support to homeowners in the aftermath of a natural disaster, offering NZ$100,000 of buildings cover and NZ$20,000 of contents cover for each event. The fund is an important safety net for New Zealanders, as the country is prone to earthquakes, storms, floods, and other natural disasters that can cause significant damage to homes and residential land.

EQCover, provided by the EQC, is a form of natural disaster insurance that is automatically included in most private home insurance policies. It covers residential homes and some areas of residential land against loss or damage from earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, and tsunamis. It also provides cover for storm and flood damage to residential land (within limits). The EQCover building cap for a residential building containing one dwelling is $300,000 + GST per natural disaster event.

The EQCover premium, also known as the levy, is collected by private insurers and paid into the NDF. The fund is then used to pay EQCover claims, with the government guaranteeing to cover any shortfall if the fund is depleted after a major natural disaster. This partnership between the EQC and private insurers streamlines the claims process, providing much-needed support to families as they recover from a catastrophe.

Earthquake Commission Act 1993

The Earthquake Commission Act 1993 established the Earthquake Commission (EQC) as a Crown entity in New Zealand. The EQC provides insurance for natural disasters, including earthquakes, through EQCover, which is available via private home insurance policies. EQCover is typically automatically included in home insurance policies.

EQCover insures residential homes and some areas of residential land against loss or damage from earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, and tsunamis. It also covers residential land (within limits) against storm and flood damage. If a home is damaged by a natural disaster, the EQC will pay for repairs up to the maximum EQCover amount, with the home insurance policy covering any remaining costs up to the sum insured. The maximum EQCover amount increased from NZ$150,000 to NZ$300,000 (+GST) in October 2022, with the maximum EQC levy also increasing from NZ$300 to NZ$480 (+GST).

The EQC administers the New Zealand Natural Disaster Fund (NDF), which is funded by a levy imposed on all households with homeowner insurance. The NDF provides financial support to homeowners in the event of a natural disaster, offering NZ$100,000 of buildings cover and NZ$20,000 of contents cover for each event. The EQC is also responsible for investing the NDF and ensuring adequate reinsurance cover.

The Earthquake Commission Act 1993 has undergone several amendments and reviews since its inception. Notably, in February 2019, four key changes were made: facilitating EQC information sharing, extending the timeframe for lodging EQC claims, removing contents cover, and increasing the cap on residential building cover. The Act was further modernised, resulting in the Natural Hazards Insurance Act 2023, which will replace the Earthquake Commission Act 1993 from 1 July 2024 for new claims.

Claim process

The claim process for earthquake insurance in New Zealand can vary depending on the specific circumstances and the insurance provider. However, here is a general overview of what you can expect:

• Contact Your Insurer: If your home or property has been damaged in an earthquake, the first step is to contact your private insurance provider as soon as possible. Most EQCover claims can be managed by your private insurer, so they will be your main point of contact throughout the claim process.
• Provide Necessary Information: When you make the initial contact, be prepared to provide basic information about the damage. This may include details such as the date and time of the earthquake, the extent of the damage, and any immediate health or safety concerns.
• Lodge a Claim: Your insurer will guide you through the process of lodging a formal claim. They may provide you with claim forms to fill out or direct you to an online portal where you can submit your claim. Make sure to gather any relevant documentation, such as photographs of the damage, repair estimates, and proof of ownership.
• Assessment of Damage: After your claim has been lodged, your insurer or an appointed assessor will need to inspect the damage to your property. They will assess the extent of the damage, determine what repairs are necessary, and estimate the cost of those repairs. This assessment is crucial in determining the payout you will receive.
• Temporary Repairs: In some cases, you may be authorized to make temporary repairs to secure your property and prevent further damage. Keep all receipts and documentation related to these repairs, as these may be reimbursable under your policy.
• Claim Approval and Payout: Once your claim has been assessed and approved, your insurer will inform you of the payout amount and how it will be disbursed. The payout may cover repairs, temporary accommodation, or other expenses outlined in your policy.
• Dispute Resolution: If you disagree with the assessment or payout amount, you have the right to dispute the decision. Your insurer should have a dispute resolution process in place, and you may also seek free, independent dispute resolution services if needed.
• Repairs and Reconstruction: After your claim is approved and you have received the payout, you can proceed with the necessary repairs or reconstruction of your property. Ensure you keep accurate records of all expenses and communicate any significant changes or updates to your insurer.

Please note that this is a general overview, and the specific process may vary depending on your insurance provider and the details of your policy. It is always recommended to carefully review your insurance policy documents and contact your insurer directly for guidance on the claim process specific to your coverage.

Coverage limits

EQCover is natural disaster insurance for residential homes and some areas of residential land. It is provided by the Earthquake Commission (EQC), a unique partnership between the New Zealand government and the insurance industry.

EQCover insures your home and some areas of your residential land against loss or damage from earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, and tsunamis. It also insures your residential land (within limits) against storm and flood damage.

The maximum EQCover amount for a residential building containing one dwelling is $300,000 + GST for each natural disaster event. This amount increased from $150,000 + GST on October 1, 2022. If your property was damaged by a natural hazard event before October 1, 2023, the relevant building cap may be lower than $300,000 + GST.

For residential buildings with multiple dwellings, the coverage is calculated by multiplying the maximum EQCover amount by the number of homes within the building. For example, if there are two homes within a residential building, the coverage limit would be $600,000 + GST.

The maximum EQCover amount for a residential land claim, commonly referred to as the "land cap," is calculated in two parts:

The market value at the site of damage, which is determined by the smallest of the following three areas:

• The area of land that is actually lost or damaged.
• The minimum-sized site for a residential building allowed under the district plan in the area of residence.
• An area of land of 4,000 square meters, if applicable.

The indemnity value of any insured bridges, culverts, or retaining walls that have been lost or damaged.

The maximum amount EQCover can pay for a residential land claim is the lesser of either the land cap or the cost to repair or reinstate the insured land and land structures that have been lost or damaged.

It is important to note that EQCover does not cover the contents of your home, such as intangible property, vehicles, trailers, boats, aircraft, plants, animals, roads, tennis courts, jetties, pavings, and certain other structures. These may be covered by a separate private insurance policy.

Additionally, if the cost of damage to your home exceeds the EQCover limit, your private home insurance policy will cover the remaining cost up to your sum insured.

Frequently asked questions