Natural Disaster House Insurance NZ – What You’re Really Covered For

Think you're fully insured for earthquakes or floods? Learn how New Zealand's house insurance policies work during disasters and find out if you're carrying a $200,000+ risk.

Updated 15 September 2025

Summary

When disaster strikes, the difference between full recovery and financial ruin often comes down to three words buried in your insurance policy.
Our guide reveals what happens when you need to claim, why thousands of New Zealanders continue to find themselves underinsured at claim time, and how to ensure you're genuinely protected.
The Auckland Anniversary floods resulted in homes being ruined, and in many cases, disputes with insurers over whether a $800,000 sum insured amount, for example, would cover the $1.1 million rebuild quote.
Homeowners with area replacement cover generally experience less hassle, as the insurer pays the cost to replace the home if the total floor area provided is accurately calculated - it's not capped by a sum insured limit.
This scene keeps recurring - we've seen it play out thousands of times across Auckland, Hawke's Bay, and Canterbury. Each disaster reveals the same brutal truth - most New Zealanders think they're fully covered for natural disasters, but when they need to claim, unless their sum insured amount is accurate, there is a shortfall.
Research from Deloitte, published in 2023, confirmed New Zealand homeowners are underinsured (which is the gap between the value of an asset and how much it is insured for). Globally, New Zealand ranks 26th out of 56 OECD countries in terms of insurance spending, at 3% of GDP, compared to the OECD average of 9.4%.
Here's what some insurance companies don't advertise - "full replacement" doesn't mean what you think it means. Natural disasters create perfect storms of building cost spikes, material shortages, and overwhelmed builders and contractors. Your carefully calculated sum insured policy might not cover the distance when everyone needs rebuilding at once.

Our guide explains what happens when floods, earthquakes, or storms destroy your home. We outline the hidden costs, claim battles, Natural Hazards Commission (formerly the EQC) complexities, and, most importantly, how to ensure you're genuinely protected when New Zealand's increasingly violent weather and tectonic plate shifts come calling. We cover:

Important: When Natural Disasters Strike, Only Area Replacement Insurance Fully Protects You

The Auckland floods and Cyclone Gabrielle exposed a brutal truth - when disasters hit and building costs spike 40%, most insurance leaves homeowners with massive shortfalls. Only MAS area replacement covers the actual rebuild cost, no matter how high prices surge.

How Natural Disasters Destroy Sum Insured Coverage:

After the Christchurch earthquakes, building costs jumped 40-70% overnight, sum insured homeowners faced $200,000+ shortfalls while MAS area replacement customers were fully covered with no shortfalls
After the Auckland floods, material shortages drove costs up 35%, sum insured homeowners scrambled to find extra funds while MAS area replacement customers were protected from all cost increases
After Cyclone Gabrielle, builder shortages pushed prices up 50%, sum insured homeowners faced high costs to rebuild whereas MAS area replacement customers rebuilt without financial stress

Why MAS Makes the Difference in Disasters:

Uncapped coverage - While sum insured has a ceiling, MAS area replacement has none
No arguments about adequacy - Your coverage automatically adjusts for disaster-driven cost spikes
Proven disaster performance - MAS paid out fully after every major NZ disaster
Not-for-profit structure - MAS exists to pay claims, not protect profits

Get Your MAS Natural Disaster Protection House Insurance Estimate
In disaster-prone New Zealand, the question isn't IF you'll need this protection, but when. Every major disaster proves the same point - sum insured can fail when you need it most. MAS area replacement works when disasters strike. If you prefer sum insured coverage, Tower and Initio offer competitive options within that model. Please note that you're assuming the risk of the rebuild cost.

Get a MAS Estimate Now

The Brutal Reality - What Recent Disasters Taught New Zealand Homeowners About House Insurance

A series of natural disasters have hit New Zealand in recent years - we outline the insurance aspects of these terrible events.

Auckland Anniversary Weekend Floods (January 2023)

Four months' worth of rain fell in one day in Auckland, turning streams into torrents and homes into swimming pools. The numbers tell one story - 4,000+ homes damaged, $2 billion in claims, but the problem for many homeowners facing a red sticker and full loss was the gap between what people thought they had and what they actually got.

Natural disasters keep coming - this March 2024 RNZ story outlined how a house in Swanson flooded the previous January and was temporarily uninsured (because of damage caused by previous flooding) before being hit by the Auckland Anniversary Weekend Floods - a total loss. Natural disasters cause a significant amount of stress and require a considerable amount of time to recover from.

We have heard from MoneyHub readers who have had experiences of being underinsured. In one instance, an Auckland resident's home was flooded with contaminated water, raising concerns that the $750,000 sum insured on a 200-square-metre house, purchased for $650,000 five years ago, was insufficient. This was particularly evident when the first builder's quote to reinstate the home was $1.05 million.

The issue was that it wasn't just rebuilding, it was new drainage requirements, upgraded foundations for flood resilience, and every tradie in Auckland was booked solid (at the time). This left the homeowner with the option of either finding $300,000 or walking away from their land. Similar challenges can arise with any policy if exclusions apply, although opting for area replacement cover can help mitigate the impact of cost spikes.

Floods will continue to occur. As we published the first draft of this guide in July 2025, there was extensive flooding in Nelson, Tasman, and Auckland, and we know that homeowners will likely make claims from these events.

Cyclone Gabrielle (February 2023)

Just weeks after Auckland dried out, Gabrielle slammed into Hawke's Bay and Tairāwhiti, the two events causing over 100,000 claims in total (per Insurance Council NZ reporting). Entire communities vanished under silt. The Esk Valley became a graveyard of homes, orchards, and dreams. 11 people lost their lives, and thousands lost their homes.

The insurance problems that followed have been devastating. This 2024 Stuff article detailed how a Hawke's Bay homeowner, whose house was destroyed by Cyclone Gabrielle, was only paid half the cost of rebuilding his property. His sum insured: $350,000. The rebuild reality was claimed to be over $700,000. The insurance company responded that he should have updated his sum insured. As is the case throughout New Zealand, there is a lack of awareness about how building costs could jump 40% overnight if a natural disaster were to occur in the area.

This wasn't unusual. Major insurers received complaints from homeowners who were underinsured but didn't understand what that meant until they were faced with huge shortfalls.

A 2024 report titled "One-third of flood losses in New Zealand not insured, study finds" stated that uninsured losses from the Auckland Anniversary Weekend floods and Cyclone Gabrielle in New Zealand totalled $2.3 billion, representing a third of the affected physical assets. However, "uninsured losses" typically refers to the total protection gap, which includes:

Completely uninsured - No insurance at all
Underinsured - Insurance insufficient to cover full losses (a huge problem with natural disaster claims)
Excluded items - Things policies don't cover (e.g., landscaping, driveways)
Below excess - Damage less than policy excess (so no claim is made)
Consequential losses - Business interruption, temporary accommodation beyond limits

What's clear is that many cyclone-affected homeowners realised their sum insured hadn't been updated since 2019 - before COVID, before building cost inflation, before the world changed.

July 2024 insurance industry reporting confirmed that almost 18 months after Gabrielle, homeowners were still waiting for claims and fighting insurance battles. A cyclone may be a short-lived natural disaster, but the recovery for homeowners can drag out for months and years if they're underinsured.

The Christchurch Earthquake Sequence (2010-2011)

The February 2011 quake killed 185 people and destroyed thousands of homes, but the financial aftershocks long after.

Before the quake, rebuilding a standard home involved stable companies. However, the rebuild saw the average cost per square meter jump up 40%. The Insurance Council reported that of the $38 billion in claims, underinsurance added billions more in personal costs to homeowners.

Homeowners also faced hidden costs nobody warned about:

Temporary accommodation - most insurance only covers 3 to 6 months, for some homeowners they were out of their homes for years.
Storage costs for salvaged belongings
Alternative schooling and transport costs
Medical costs from quake-related stress (beyond whatever ACC would cover)
Fighting insurance companies for years (legal fees, reports, assessments)

The Christchurch experience exposed the limitations of sum insured. MoneyHub Founder Christopher Walsh shares his observations:

"Over the years since the quakes, I've met former Christchurch residents all over New Zealand - in small Tasman towns, rural Hawke's Bay, remote Northland. They all share the same story: their insurance payout wasn't enough to rebuild in Christchurch, so they took the money and started new lives elsewhere.

These weren't people choosing to leave - they were economic refugees from Christchurch looking for an affordable place to live. Their $400,000 payout might buy a nice life in Motueka, but it wouldn't even cover the cost of rebuilding their Christchurch home when quotes came in at over $650,000.

With 650,000 insurance claims and cases still dragging on, it's no surprise that many people were underinsured and displaced. Christchurch didn't just lose buildings - it lost thousands of residents who discovered their 'full replacement' insurance was anything but."

"AMI Insurance, one of New Zealand's largest insurers, collapsed because they didn't have enough reinsurance for the scale of claims. If insurers can get it that wrong, what chance do homeowners have of predicting the right sum insured?"

Christopher Walsh
MoneyHub Founder

The Natural Disaster Claim Timeline - A Standard Outline and Reality Check

The Natural Hazard Claim Timeline - A Standard Outline and Reality Check

Here's what could happen when a natural hazard strikes your home:

Day 1-7: The Immediate Aftermath

Your house is uninhabitable
Emergency accommodation scramble (hotels booked out)
Insurance company phone lines jammed
Natural Hazards Commission (formerly the EQC) vs private insurer confusion may begin
Temporary repairs to prevent further damage
Hidden cost 1: Emergency accommodation. Most policies cover this, but with strict limits. When every hotel in the region is full, a $200/night allowance, for example, doesn't go far.

Weeks 2-8: The Assessment Phase

Insurance assessor visits (eventually)
Natural Hazards Commission assessment (different visit, different criteria)
Engineers, builders, and specialists are all required
Scope of works debated
First indication you might be underinsured

Months 3-6: The Reality Sets In

Builder quotes arrive (if you can get them)
Quotes may exceed your sum insured if building costs have risen since your last review
The insurance company argues about reasonable costs
Natural Hazards Commission cap complications may emerge
Decision time: top up, compromise, or walk away
Hidden cost 2: Quote inflation - the first quote may have only been valid for 30 days. By the time insurance approves it, costs could have risen another 10%.

Months 6-24: The Rebuild Battle

Builder availability crisis (for example, 3-12+ month wait lists)
Material shortages drive costs higher
Insurance drip-feeds payments
Variations and discoveries blow budgets
Temporary accommodation extensions fought over
Hidden cost 3: Scope creep - opening the walls may reveal additional damage. The council requires upgrades to new codes. Each variation needs insurance approval. More delays, more costs.

Year 2-3: The Completion Struggle

Final costs exceed everyone's estimates
Quality disputes with rushed work
Insurance claims for variations
Moving costs back home
Landscaping and non-structural repairs are largely unfunded
Hidden cost 4: The gaps. Insurance covered the house structure. But the driveway, landscaping, fencing, and shed replacement? That's probably going to be on you.

Natural Hazards Commission Cover: Your First Layer of Protection (And Its Limits)

What Is Natural Hazards Insurance?
Every New Zealand with home insurance automatically has natural hazards cover through the Natural Hazards Commission (formerly the EQC). You pay for it through a levy on your insurance premium - currently up to $480 + GST per year. However, it's essential to understand that this cover is only the first layer of protection; it does not provide complete coverage.

The $300,000 Building Cap Reality
Since October 2022, natural hazards insurance covers up to $300,000 + GST for your home. Sounds substantial? Let's put that in perspective:

Average rebuild cost in Auckland: $650,000+
Average rebuild cost in Wellington: $580,000+
Post-disaster rebuild costs: Add 40%+

That $300,000 covers less than half of the cost of most homes. The rest? That's where your private insurance kicks in - if your sum insured is adequate.

We explain how this works in the next section below. Here is a brief example:

Your home's rebuild cost after earthquake: $750,000
Natural Hazards Commission pays first: $300,000 ($345,000 GST inclusive)
Your private insurance pays: $405,000 (if your sum insured is at least $750,000)
If your sum insured is only $600,000? You pay the $150,000 shortfall yourself

Key point: The $345,000 from Natural Hazards Commission is part of your total coverage, not extra on top. Think of it as the NHC covering the first $345,000 of any claim, with your private insurer covering the rest up to your policy limit.

However, despite the EQC becoming the NHC, there is no certainty of a smooth process. One Christchurch homeowner described their 2011 earthquake claim situation to MoneyHub: "The (then named EQC) said the cracks were cosmetic. My insurer said they were structural. They spent six months arguing while I lived in a broken house". These issues were part of wider court cases between insurers and the EQC that dragged on for years. MoneyHub awaits further claims to see how such issues are handled.

Natural Hazards insurance covers:

Earthquakes
Natural landslips
Volcanic activity
Hydrothermal activity
Tsunamis
Storms and floods (land damage only - not buildings)
Fire caused by any of these

Building coverage includes:

Your home structure
Garages, sheds (if domestically used)
Services up to 60m from home (water, power, sewage)

Critical exclusions:

Contents (that's your private insurer)
Temporary accommodation (private insurer)
Additional living costs (private insurer) - Extra fuel costs commuting from temporary housing, meals out because you have no kitchen, laundromat costs, kenneling pets
Consequential losses (no one covers these) - Lost income from missing work, medical costs from disaster-related stress, kids' counselling, relationship counselling, legal fees fighting insurers

Important: When natural disasters strike, building costs can spike 40-70%, leaving sum insured homeowners with massive shortfalls

The MAS Solution: Area replacement home insurance coverage that pays actual rebuild costs, no matter how high prices surge

Real Disaster Results:

Christchurch earthquakes: Sum insured shortfalls of $200,000+, MAS customers fully covered
Auckland floods: 35% cost spike covered by MAS, not by sum insured
Cyclone Gabrielle: 50% price surge protected by MAS area replacement

The Choice:

MAS Area Replacement: Pay $30-40 extra monthly, get unlimited rebuild protection
Sum Insured: Save a little now, risk $200,000+ shortfall when disaster strikes

Get Your MAS Area Replacement Estimate: Takes 2 minutes to see if you're truly protected

Get a MAS Estimate Now

How the Two-Layer Insurance System Works with Natural Disasters

How the Two-Layer Insurance System Works with Natural Hazards

Think of it like this:

First $300,000 of building damage: Natural hazards insurance pays
Everything above $300,000: Your private insurer pays (up to your sum insured)
Anything above your sum insured: You pay

Example: Wellington Earthquake Scenario

Home rebuild cost post-quake: $850,000
Natural hazards insurance pays: $345,000
Private insurance (sum insured $600,000) pays: $255,000
Your shortfall: $250,000

Know This: When disaster strikes, you're dealing with:

Your private insurer (who manages everything)
Natural Hazards Commission (who pays the first portion)
Different assessments
Different criteria
Different timelines

Your insurer acts as the middleman, but disputes over what is covered by whom can delay everything.

Understanding the Excess
You pay excess on both portions:

Natural hazards building claim: Minimum of $500 per insured home
Private insurance: Your policy excess
Land claim: Minimum $500 per insured home. Maximum $5,000 for buildings with more than 10 insured homes.

This means that after losing your home, you may have to pay $1,500 or more in excess payments to initiate the claims process.

Our View: The government's natural hazards insurance is crucial, but it's designed to ensure everyone has some coverage, not complete coverage. The $300,000 + GST cap means for most homes, it covers less than half the rebuild cost.

This makes your choice of private insurance even more critical. Sum insured provides coverage up to your nominated amount above the cap, while area replacement is based on the SQM size in the schedule.

It's essential not to let the existence of government-mandated natural hazards insurance create a false sense of security. It's a foundation, not a complete house. In disaster-prone New Zealand, that foundation needs solid private insurance on top that covers your full rebuild cost when disaster strikes.

Regional Risk Reality - Understanding Your Disaster Profile

Our 'difficult to insure' areas research explains that many areas are becoming an increasing insurance risk. We summarise what you need to know below:

Wellington

Risk: Major fault lines run directly through the region, making significant earthquakes not a matter of if, but when
Impact: Post-quake building costs historically spike dramatically as demand overwhelms supply
Hidden danger: Much of the CBD and flat suburbs sit on reclaimed land prone to liquefaction
Insurance reality: Apartment owners face complex body corporate insurance arrangements that can leave gaps
Local variances: Within the regions mentioned, pockets and suburbs have varying risk profiles.

Auckland

Risk: Increasing flood frequency, plus dormant volcanic field beneath the city
Impact: Recent floods show storm damage now hits areas never previously at risk
Hidden danger: Stormwater systems built decades ago can't cope with modern rainfall intensity
Insurance reality: Properties newly classified as flood-prone face soaring premiums or coverage refusal

Canterbury

Risk: Ongoing risk of earthquakes, as well as new flood risks, as weather patterns change
Impact: Insurance costs remain among New Zealand's highest due to perceived risk

Hawke's Bay

Risk: Direct path for tropical cyclones, river flooding, and earthquake potential
Impact: Silt damage from cyclones extends far beyond traditional flood zones
Hidden danger: Productive orchards and farms becoming uninsurable residential areas
Insurance reality: Post-Gabrielle, some areas face complete insurance withdrawal

Northland

Risk: First landfall for tropical systems, increasing drought/flood cycles
Impact: Remote locations mean rebuild costs surge when contractors must travel
Hidden danger: Slips and erosion are accelerating with each weather event
Insurance reality: Rural properties increasingly difficult to insure affordably

West Coast, Nelson and Tasman

Risk: Extreme rainfall events, river flooding, Alpine Fault proximity
Impact: Small population means limited builders, driving up post-disaster costs
Hidden danger: Critical infrastructure vulnerabilities can isolate communities
Insurance reality: Some insurers are already withdrawing from the highest-risk areas

Bay of Plenty

Risk: Volcanic zone activity, coastal flooding, and tsunami exposure
Impact: Popular growth areas building on increasingly risky land
Hidden danger: Geothermal activity can cause unexpected land instability
Insurance reality: Coastal properties facing massive premium increases

Taranaki

Risk: Volcanic activity from Mt Taranaki, coastal erosion, and flooding
Impact: Limited regional rebuild capacity means long waits post-disaster
Hidden danger: River courses changing rapidly during extreme weather
Insurance reality: Rural and coastal properties seeing coverage restrictions

Marlborough

Risk: Major fault lines, drought/flood cycles, coastal vulnerability
Impact: Specialised buildings (wineries) face extreme rebuild costs
Hidden danger: Land stability issues in hill country developments
Insurance reality: Commercial/residential mix creates insurance complications

Otago and Southland

Risk: Alpine Fault, flooding, extreme weather from the Antarctic and even tropical storms
Impact: Remote locations mean the highest transport costs for materials
Hidden danger: Infrastructure designed for a different climate is now overwhelmed
Insurance reality: Some rural areas seeing complete insurer withdrawal

All Coastal Communities

Risk: Sea level rise, storm surge, erosion acceleration
Impact: Managed retreat discussions immediately affect property values
Hidden danger: Insurance withdrawal is happening much faster than physical risks
Insurance reality: Annual premium increases of 20-50% driving people out before water does

Christchurch earthquakes: Sum insured shortfalls of $200,000+, MAS customers fully covered
Auckland floods: 35% cost spike covered by MAS, not by sum insured
Cyclone Gabrielle: 50% price surge protected by MAS area replacement

The Choice:

MAS Area Replacement: Pay $30-40 extra monthly, get unlimited rebuild protection
Sum Insured: Save a little now, risk $200,000+ shortfall when disaster strikes

Get Your MAS Area Replacement Estimate: Takes 2 minutes to see if you're truly protected

Get a MAS Estimate Now

Why Natural Disasters Can Increase Rebuild Costs

These factors affect all policies, but sum insured requires manual adjustments to account for them, as outlined in our area replacement vs sum insured comparison. We outline these in detail below.

Demand Spike Economics

When 1,000+ homes need rebuilding simultaneously:

Builder hourly rates jump 30-50%
Material costs surge 25-40%
Wait times blow out 12-24 months
Quality trades command premium prices

Compliance Issues

Your 1960s home can't be rebuilt to 1960s standards. Council requirements have changed a lot:

New foundation requirements for flood/quake resilience
Upgraded insulation standards
Accessibility requirements
Stormwater management upgrades
Fire separation requirements

Know This: Each upgrade may add 5-15% to the costs, and when combined, all of them can result in your rebuild costing 40% more than your old home.

The Shortage Spiral

Post-disaster, everything can be in extreme demand:

Gib board: 6-month wait
Roofing iron: Price doubles
Qualified builders: 18-month wait
Engineers: Booked solid
Council inspectors: Overwhelmed

Please be aware that if your carefully calculated sum insured assumes normal market conditions, disasters aren't normal, hence the risk.

The Hidden Damage Problem

Water gets everywhere. Earthquakes crack everything. Initial assessments miss:

Foundation damage (discovered during rebuild)
Frame damage (hidden until walls opened)
Services damage (pipes, wiring degraded)
Land damage affecting building stability

Each discovery requires new approvals, additional costs, and potential delays.

Understanding Area Replacement: How and Why It Works When Disaster Strikes

Area replacement differs in that it bases coverage on floor area and current costs, rather than a fixed amount you nominate (as is the case with sum insured). When disaster strikes and building costs spike 40%, your coverage in uncapped.

How Area Replacement Works
Let's say you have a 200sqm home:

An indicative rebuild cost: $2,500/sqm = $500,000 coverage
Post-disaster, when everyone needs builders: $3,500/sqm = $700,000 coverage
What you pay: Just your excess

The insurer carries the risk of cost increases, not you. There are no arguments about whether your sum insured was adequate. No scrambling to find hundreds of thousands extra. Just genuine coverage when you need it most.

Why Area Replacement Saves You in Disasters:

Uncapped Cover: Following the Christchurch earthquakes, building costs increased by 40-70% overnight. Area replacement customers were automatically covered for these increases. Sum insured customers faced massive shortfalls.
No Prediction Required: You can't predict when disasters strike or how much costs will spike. With area replacement, your cover is uncapped and there is not the need to keep re-setting a sum insured limit.
Simplicity Under Stress: After losing your home, the last thing you need is to fight about whether your sum insured was adequate. Area replacement removes that battle. One less thing to worry about during the worst time of your life.
True Risk Transfer: Insurance should transfer risk from you to the insurer. Sum insured leaves you carrying the risk of cost increases. Area replacement puts that risk where it belongs - with the insurance company.

Know This: Area replacement costs more; typically, premiums are 10-20% higher. On a $2,000 annual policy, that's an additional $200 to $400 per year. But let's look at what "saving" that money means:

The Auckland Flood Example:

The homeowner chose sum insured to save $300/year
Saved $3,000 over 10 years
Flood damage rebuild shortfall: $280,000
Actual cost of "saving": $277,000 net loss

The Wellington Earthquake Scenario:

The homeowner pays an extra $400/year for area replacement
"Wastes" $4,000 over 10 years
Earthquake strikes, rebuild costs spike 60%
Additional coverage provided: $420,000
Return on investment: 10,400%

Our View: The question isn't "can I afford area replacement?" It's "can I afford to be $200,000 short when disaster strikes?"

Who Offers Area Replacement?
Very few insurers offer area replacement because it's arguably more profitable to let you carry the risk of any shortfall. Your options include:

MAS (available nationwide)
FMG (primarily rural properties)
Selected others in specific circumstances

The fact that so few insurers offer it arguably tells you everything about who benefits from sum insured.

Christchurch earthquakes: Sum insured shortfalls of $200,000+, MAS customers fully covered
Auckland floods: 35% cost spike covered by MAS, not by sum insured
Cyclone Gabrielle: 50% price surge protected by MAS area replacement

The Choice:

MAS Area Replacement: Pay $30-40 extra monthly, get unlimited rebuild protection
Sum Insured: Save a little now, risk $200,000+ shortfall when disaster strikes

Get Your MAS Area Replacement Estimate: Takes 2 minutes to see if you're truly protected

Get a MAS Estimate Now

Your Natural Disaster Insurance Checklist

Part 1: Before Disaster Strikes

Check Your Coverage Type

Find your policy: Sum insured shows a dollar amount
Area replacement shows square meters
If sum insured, when was it last updated?

Document Everything

Video walkthrough of the entire property
Photos of all valuable items
Store copies in the cloud (physical copies might be destroyed)
List of improvements since purchase

Know Your Contacts

Insurance company 24/7 claim number
Preferred builders (they'll be booked fast)
Emergency accommodation options

Understand Your Risks

Check the council hazard maps
Know your evacuation routes
Understand your specific coverage
Review annually before renewal

Part 2: After Disaster Strikes

Immediate Actions

Ensure safety first
Contact the insurer within 24 hours
Document all damage before cleaning
Keep all receipts (everything)

Avoid These Mistakes

Don't accept the first assessment as final
Don't start repairs without approval
Don't throw anything away until it's documented
Don't accept cash settlements without legal advice
Don't assume anything is covered - ask

Our View: New Zealand's weather is getting more violent. The "one in 100 year" events now happen every few years. Insurance companies know this. That's why:

Premiums in flood-prone areas have doubled
Some coastal properties are becoming uninsurable
Excesses for natural disasters are increasing
Coverage is shrinking while costs rise

The insurance industry is slowly retreating from high-risk areas. If you're still insurable, protect that coverage. Because once you're deemed too risky, you're on your own.

Part 3: Considering Area Replacement to Minimise Your Risk? Your Action Plan

If you have sum insured and want to assess area replacement alternatives:

1. Get Quotes Now

Contact MAS and FMG for area replacement quotes
Compare with your current sum insured premium
Factor in peace of mind, not just price

2. Don't Wait for Renewal

You can switch anytime
Get a pro-rata refund from the current insurer
Better protected immediately

3. Calculate Your Real Risk

Current rebuild cost per sqm in your area
Add 40% for the disaster scenario
Compare to your sum insured
That gap is your liability

The Bottom Line

When the next earthquake shakes Wellington, or the next cyclone floods Auckland, or the next weather bomb hits anywhere in New Zealand, thousands of homeowners will discover they're not fully insured - they're partially insured with massive personal liability. You don't have to be one of them.

Area replacement costs more because it fully protects you when disasters strike. Sum insured is cheaper because you're carrying the risk that you're accurately insured. When your home is destroyed and building costs have spiked 40%, those savings can turn into a financial catastrophe unless your sum insured has been actively and accurately managed.

Overall, the question isn't whether New Zealand will see more natural disasters - it's when and where.

The only question that matters to you is simple - will your insurance work when you need it?

Check your policy today. If you see a dollar amount instead of square meters, you may be underinsured and carrying more risk than you realise. In disaster-prone New Zealand, that can be a risk. If your sum insured is insufficient. When the ground shakes or the waters rise, the only thing that matters is whether you can rebuild your life without financial ruin. Everything else is just noise. Please consider your home insurance carefully.

Help us improve our research: Have you been through a natural hazard claim? Share your experience by contacting our research team to help others prepare.

Frequently Asked Questions

We explain common queries below:

What's the difference between natural hazards insurance and my home insurance?

The Natural Hazards Commission, (formerly the Earthquake Commission, or EQC), covers the first $300,000 + GST of damage from earthquakes, volcanic activity, landslides, tsunamis, and storm-related land damage. Your private home insurance covers everything above this cap, plus floods to buildings, contents, and temporary accommodation.

You can think of it as a two-layer cake - the government's scheme covers the bottom layer, and your insurer covers the top (up to your sum insured or area replacement limit.

I've never had to claim in 20 years, and where I live hasn't had any natural disasters. Am I worrying about nothing?

That's like saying you've never had a car accident, so you don't need insurance. The Christchurch earthquakes, Auckland floods, and Cyclone Gabrielle all hit areas that hadn't seen major disasters in decades. Climate change means "100-year events" now happen every few years. Your 20 years of luck don't predict the next 20.

How do I know if I'm underinsured?

Check when you last updated your sum insured. If it's been three years or more, you're almost certainly underinsured by 20-30% or more. Building costs have risen faster than general inflation. Add 40% for post-disaster spikes, and your comfortable $600,000 sum insured might leave you $300,000 short. With area replacement, this risk is eliminated.

What exactly happens when disaster strikes my area (in terms of insurance claims)?

First, ensure safety and contact your insurer immediately. They'll manage both the natural hazards and private insurance portions.

Document everything before you touch anything:

Video walk-through of all damage (narrate what you're filming)
Close-up photos of damaged items, walls, and flooring
Wide shots showing overall damage
Photos of serial numbers on appliances/electronics
Keep damaged items until the assessor approves disposal

You can likely expect weeks of assessments, months of waiting for builders, and years of rebuilding. Hidden costs include temporary accommodation beyond policy limits, storage, increased travel costs, and fighting insurance battles. Create a dedicated email folder, a Google Drive Folder, and a physical file for all disaster-related paperwork.

Why do building costs spike so much after disasters?

It is simple supply and demand. When 4,000 homes need rebuilding simultaneously, every builder can charge premium rates. Materials run out - gib board, timber, roofing iron all become scarce. Qualified tradespeople book out for 12-18 months. Add new compliance requirements, and suddenly your $500,000 rebuild costs $750,000. This is exactly what happened in Christchurch and is likely to repeat with every major disaster.

Can I just update my sum insured every year?

You can, but will you? And even if you do, you're still guessing. What if disaster strikes the month before your review? What if costs spike 40% overnight, like in Christchurch? Annual updates help, but don't eliminate risk. Area replacement truly protects you from building cost spikes, unless you've calculated an accurate sum insured.

What about contents insurance - is that affected too?

Contents insurance is separate from building cover and isn't affected by area replacement vs sum insured. However, many people underestimate the value of their contents. Walk through your home and add up the cost of replacing everything, including clothes, electronics, furniture, and appliances. We believe many households have contents valued at $100,000 or more but are insured for less than $50,000.

I rent - does any of this apply to me?

Natural disasters affect renters, too. While building insurance is typically your landlord's responsibility, you may need contents insurance. After floods or earthquakes, you could lose everything and face weeks in emergency accommodation. Many renters discovered after the recent floods that their few possessions cost $30,000 or more to replace.

My house is new - do I need area replacement?

New builds face the same risks. While you know exactly what it costs to build today, when it comes to claiming, things may have changed a lot. The Christchurch rebuild demonstrated that even simple, modern homes cost 40% more to rebuild when everyone needed builders simultaneously. Unless you update your sum insured annually (and accurately estimate future costs), area replacement provides better protection.

What if my insurer doesn't offer area replacement?

Only a handful of insurers offer it - MAS, FMG (for rural properties), and a few others. If yours doesn't, you have three options, you may consider:

Switching to one that does
Religiously update your sum insured every year (and hope you guess right - our calculator is a useful starting point), or
Accept that you're carrying a significant personal risk.

How do I claim a natural disaster?

Contact your insurer immediately - they handle both natural hazards and private portions. Document all damage before cleaning up. Take photos and videos. Keep damaged items until assessed. Get multiple quotes if possible. Be prepared for long waits - everyone else is experiencing the same issue. Most importantly, understand your coverage limits before you need to claim.

What about flood-prone or earthquake-prone areas - can I still get insurance?

Increasingly difficult. Some insurers are withdrawing from high-risk areas entirely. Others are hiking premiums 50-100% annually. If you can still get coverage, protect it. Once deemed uninsurable, your options shrink to government coverage only ($300,000 + GST cap) or self-insurance.

The government scheme covers earthquakes, so why worry?

The government scheme's $300,000 + GST cap covers less than half of most homes. In Auckland or Wellington, it may cover only 35% of the rebuild costs. The rest comes from your private insurance, if your sum insured is adequate. After the cap, you're on your own. That's why your private insurance choice (sum insured vs area replacement) matters more than ever.

Is area replacement really "set and forget"?

Mostly, but not entirely. You still need to notify your insurer of major renovations or extensions that change the floor area. Premiums continue to increase in line with general inflation and risk assessments. But critically, you don't need to guess future rebuild costs or update coverage amounts. The building cost risk transfers to your insurer.

What can I do today to protect myself from the risk of any shortfall in a natural disaster?

Check your policy now. If you see a dollar amount (sum insured), calculate your risk using a house insurance calculator, factoring in 40% on top of the rebuild cost for disasters. If that exceeds your sum insured, you're arguably exposed (should rebuild prices surge after a natural disaster). You can then get area replacement quotes from MAS and FMG.

The best approach is to compare total protection, not just premiums. If switching makes sense, don't wait for renewal - you can switch anytime and get pro-rata refunds if you've paid upfront for a year's coverage. Most importantly, you'll want to act before disaster strikes, not after it has already occurred.

Important: When natural disasters strike, building costs can spike 40-70%, leaving sum insured homeowners with massive shortfalls

The MAS Solution: Area replacement home insurance coverage that pays actual rebuild costs, no matter how high prices surge

Real Disaster Results:

Christchurch earthquakes: Sum insured shortfalls of $200,000+, MAS customers fully covered
Auckland floods: 35% cost spike covered by MAS, not by sum insured
Cyclone Gabrielle: 50% price surge protected by MAS area replacement

The Choice:

MAS Area Replacement: Pay $30-40 extra monthly, get unlimited rebuild protection
Sum Insured: Save a little now, risk $200,000+ shortfall when disaster strikes

Get Your MAS Area Replacement Estimate: Takes 2 minutes to see if you're truly protected

Get a MAS Estimate Now

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