# B-T11-H-03: How should I compare cover when a property has special terms or high earthquake excesses?

Collected 11 October 2026

[Home and contents insurance study](https://nzbrands.ai/research/insurance/home-contents-insurance)

## ChatGPT

Answer ID: f61c13ff-2d83-48b3-a015-cc41db5be22f

In New Zealand, when a property insurance policy has special terms, exclusions, or a high earthquake excess, the best way to compare cover is to look beyond the annual premium. Focus on what each insurer will actually pay after an earthquake or other major loss, what you would need to pay yourself, and whether any restrictions could leave you underinsured.

A cheaper policy can be poor value if it has a much higher excess, a lower payout limit, or special conditions that make a claim harder to settle.

## 1. Compare the terms that matter most

| What to compare | What to look for |
| --- | --- |
| Earthquake excess | The dollar amount or percentage you must pay for each claim, and whether it is calculated on the sum insured or the damage amount. |
| Special terms | Restrictions relating to the property's earthquake risk, construction, foundations, retaining walls, or previous damage. |
| Exclusions | Damage or structures that are not covered, including any specific exclusions added for your property. |
| Sum insured | Whether the insured amount is sufficient to rebuild the home, including demolition, debris removal, professional fees and compliance with current building requirements, where covered. |
| Claims settlement | Whether the insurer pays repair costs, rebuilds, or applies particular limits or conditions. |
| Premium | The annual cost, considered alongside the excess, exclusions and quality of cover. |

Pay particular attention to the policy schedule and any endorsements or special conditions. The standard policy wording alone may not tell you the full story for your property.

## 2. Calculate the real cost of an earthquake excess

A percentage excess can be much more expensive than it first appears.

For example, if a property has a sum insured of NZ$1 million:

Illustrative earthquake excesses

2% excess

Of NZ$1 million

## $20,000

5% excess

Of NZ$1 million

## $50,000

10% excess

Of NZ$1 million

## $100,000

These are examples only, not quoted terms. Check whether the actual policy applies the percentage to the sum insured, the claim amount, or another defined amount.

Ask the insurer whether the excess applies per event, per building, or separately to different types of damage. Also check whether a natural-hazard claim involves separate building and land excesses under the applicable New Zealand scheme. [Insurance](https://www.consumerprotection.govt.nz/help-product-service/managing-money/insurance)[About natural hazards cover :: Natural Hazards Commission Toka Tū Ake](https://www.naturalhazards.govt.nz/insurance-and-claims/about-nhcover/)

## 3. Treat special terms as a separate risk

Don't simply rank policies from cheapest to most expensive. For each special condition, establish:

- What exactly is restricted? Get the full wording rather than relying on a verbal description.
- What is the consequence? Does the term increase your excess, exclude a particular type of damage, impose a sub-limit, or require repairs or engineering work?
- Can the restriction be removed? Ask whether an engineering report, a builder's assessment, completed remedial work or further documentation could improve the terms.
- What remains covered after an earthquake? Clarify whether the restriction affects only a particular component, such as foundations or retaining walls, or could affect a wider claim.

A policy with a high excess but broad cover may be preferable to one with a lower excess and a significant earthquake exclusion. The answer depends on the actual wording and the financial risk you can afford to carry.

## 4. Understand the New Zealand natural-hazard cover

For residential property, distinguish the cover provided by the Natural Hazards Commission Toka Tū Ake (NHCover) from the additional cover provided by your private insurer.

NHCover generally applies to eligible residential property with the required qualifying private insurance, subject to statutory limits and conditions. It does not mean every part of an earthquake loss will automatically be paid. Land, buildings, retaining walls and other features can be treated differently, so check the applicable limits and your private policy's response. [About natural hazards cover :: Natural Hazards Commission Toka Tū Ake](https://www.naturalhazards.govt.nz/insurance-and-claims/about-nhcover/)[House & Contents Insurance: Sum Insured Explained](https://www.icnz.org.nz/individuals/house-contents/)

Useful official guidance:

- [Natural Hazards Commission — NHCover](https://www.naturalhazards.govt.nz/insurance-and-claims/about-nhcover/)
- [Insurance Council of New Zealand — Consumer guides](https://www.icnz.org.nz/individuals/consumer-guides/)

## 5. Use a side-by-side comparison before choosing

Ask each insurer or broker to complete the same comparison for the property.

| Comparison point | Insurer A | Insurer B |
| --- | --- | --- |
| Annual premium | $\_\_\_ | $\_\_\_ |
| Earthquake excess and calculation basis | \_\_\_ | \_\_\_ |
| Special terms and exclusions | \_\_\_ | \_\_\_ |
| Foundation and retaining-wall cover | \_\_\_ | \_\_\_ |
| Rebuild limit and additional costs | \_\_\_ | \_\_\_ |
| Conditions that could improve cover | \_\_\_ | \_\_\_ |
| Maximum likely out-of-pocket exposure | $\_\_\_ | $\_\_\_ |

My recommendation: Give the greatest weight to the breadth of earthquake cover, the dollar amount of the excess, and any exclusions that could affect a major claim. Consider the premium only after you understand those three factors.

If the terms are unclear, ask the insurer or broker to confirm the interpretation in writing before committing. The Insurance Council also recommends checking the latest policy schedule and wording, rather than relying on previous renewal terms. [Consumer Guides](https://www.icnz.org.nz/individuals/consumer-guides/)[Duty of Disclosure: What to Tell Your Insurer](https://www.icnz.org.nz/individuals/consumer-guides/things-you-need-to-tell-your-insurer/)

One question that would help me tailor this advice: Are you comparing insurance quotes for a property you already own, or assessing a property before buying it? The best approach differs slightly, particularly if the special terms relate to earthquake-prone land, foundations or previous damage.

## Gemini

Answer ID: 7f4d3d70-3f8e-4bcb-ac26-fd7c868a7ede

Comparing house insurance in New Zealand when a property features special terms, exclusions, or a high earthquake excess requires a careful look beyond the headline premium. In New Zealand's risk-based pricing environment, insurers handle seismic risk, land classifications (such as TC3 or specific geological zones), and past claims history very differently. 

A structured approach helps effectively compare your options and protect your financial position.

---

### 1. Dissect the Earthquake Excess Structure
Unlike standard claims (which usually carry a fixed dollar excess like $400 or $500), earthquake and natural disaster excesses in New Zealand are frequently calculated as a **percentage of the total sum insured** (e.g., 1%, 2%, or higher for high-risk zones or specific property types), or carry a high minimum fixed dollar amount.
* **Calculate the absolute cash exposure:** Multiply the policy's earthquake excess percentage by your house's sum insured. For example, a 2% excess on a $900,000 sum insured means you must pay the first **$18,000** out of pocket before private top-up cover kicks in (on top of any Natural Hazards Commission / NHC excess).
* **Compare "like-for-like" excesses:** When reviewing quotes, check whether one insurer offers a flat excess while another scales it by a percentage. A lower premium is often offset by a drastically higher earthquake out-of-pocket cost.

### 2. Evaluate Special Terms and Endorsements
Special terms (often noted on the policy schedule as endorsements or exclusions) are legally binding conditions placed on your policy due to a property's unique history, land stability, or structural quirks.
* **Identify the trigger:** Check whether special terms exclude specific parts of the property (e.g., unreinforced retaining walls, specific outbuildings, or pre-existing foundation cracks) or require engineering sign-offs.
* **Weigh "Full Cover" vs. "Limited Cover":** If an insurer applies a restrictive special term (such as excluding landslip or retaining wall cover for a hillside property), check if a competing insurer offers broader terms, even if it requires a higher premium. 

### 3. Factor in the NHC (formerly EQC) Interaction
In New Zealand, private house insurance works alongside the government-backed Natural Hazards Commission (NHC), which provides natural disaster cover up to $300,000 plus GST for building damage. 
* **Understand where private excess applies:** Your private insurer's earthquake excess generally applies to the *total* claim or to the portion of damage that exceeds the NHC cap. Ensure you know how the private insurer applies their high excess relative to an NHC payout.

### 4. Run a Total Cost of Risk Comparison
To make an objective decision between competing quotes, evaluate the annual financial impact over time:

| Cost Component | Insurer A (Lower Premium / High Excess) | Insurer B (Higher Premium / Standard Excess) |
| :--- | :--- | :--- |
| **Annual Premium** | Lower (e.g., $2,200) | Higher (e.g., $3,100) |
| **Earthquake Excess** | High percentage / flat fee (e.g., $15,000) | Standard (e.g., $2,000) |
| **Special Terms** | Contains specific exclusions or warranties | Fewer or no restrictive endorsements |
| **Net 5-Year Difference** | Savings in premiums: $4,500 <br> Potential out-of-pocket risk: +$13,000 | Higher guaranteed outlay, but lower vulnerability to a catastrophic single-event cash loss |

---

### Key Questions to Ask Insurers or Brokers
* *"Is the high earthquake excess a fixed dollar amount or a percentage of the sum insured, and exactly how much is that in dollars based on my current rebuild valuation?"*
* *"Can these special terms be removed or reviewed after an independent geotechnical or structural engineering report is provided?"*
* *"If a natural disaster occurs, how do your claims team manage the handoff between the NHC payout and your private policy excess?"*

<FollowUp label="Want me to explain how house sum insured is calculated to ensure your earthquake excess percentage is based on an accurate rebuild figure?" query="Explain how to calculate the correct house sum insured for a New Zealand property, including demolition and professional fees."/>

## AI Overviews

Answer ID: d2eee053-20df-4f0b-92dc-32e895ca90e4

When a property has special terms or high earthquake excesses, you should compare cover by **calculating your total financial exposure** and **evaluating the scope of restrictions** rather than just comparing annual premiums.

In New Zealand's high-risk insurance market, standard policies often don't apply to complex properties, making a line-by-line comparison essential.

1\. Calculate the Financial Gap (Excesses)

High earthquake excesses significantly alter your out-of-pocket costs during a disaster.

 * **Standard vs. Percentage Excess:** Standard policies usually have a fixed excess (e.g., $500 or $1,000). High-risk properties often face percentage-based excesses (e.g., **1% to 5% of the site's total sum insured**).

 * **The Math:** On a **$1,000,000 sum insured** , a 5% earthquake excess means you must pay the first **$50,000** of a claim.

 * **Comparison Strategy:** Add the cost of the potential excess to your financial emergency planning. A policy with a $200 cheaper premium but a $30,000 higher excess is rarely a good trade-off.

2\. Scrutinize "Special Terms" and Exclusions

Special terms are restrictive conditions added by underwriters due to specific risks (e.g., flood zones, land instability, or non-standard construction).

 * **Gradual Damage Limits:** Check if the policy reduces or completely removes cover for gradual hidden damage (like leaking pipes).

 * **Land Cover:** Look closely at what EQCover (Toka Tū Ake EQC) touches versus what the private insurer covers. Special terms might exclude retaining walls, bridges, or long driveways.

 * **Matching Materials:** Some special terms state the insurer will not pay to match undamaged parts of the property (e.g., replacing a damaged section of a roof with mismatched iron).

3\. Key Elements to Compare Side-by-Side

Feature| Standard Policy| Special/High-Excess Policy| What to Look For
---|---|---|---
**EQC Cap Integration**| Insurer covers everything above the **$300,000 EQC cap**.| Insurer may apply their high excess to the _entire_ claim, or only the portion above EQC.| Ensure the high excess doesn't eat into the EQC payout.
**Sum Insured Basis**| Replacement value.| Indemnity value (present-day value accounting for age/wear).| Avoid **Indemnity Value** terms if possible; they pay out significantly less.
**Temporary Accommodation**| Standard limits (e.g., $30,000).| Capped, shortened, or excluded.| If an earthquake displaces you, ensure this cover lasts long enough for NZ's slow rebuild times.

4\. Leverage Specialist Brokers

If major mainstream insurers (like IAG, Suncorp, or Tower) are imposing heavy terms, do not try to compare policies alone.

 * Use a **specialist insurance broker** who has access to offshore markets (like Lloyd's of London) or underwriting agencies.

 * A broker can negotiate to trade a slightly higher premium in exchange for lowering an unmanageable earthquake excess.

If you want to narrow this down, tell me:

 * What **specific special terms** or **excess percentages** are insurers quoting you?

 * Where generally is the property located or what is its **primary hazard** (e.g., coastal, cliffside, unreinforced masonry)?

I can give you a clearer breakdown of what those specific terms mean for your liability.

## Google AI Mode

Answer ID: 2026f2be-5ee9-4e64-8def-abe4a9704d67

When a _New Zealand_ property comes with **special terms** (such as exclusions, restricted scopes, or mandatory maintenance requirements) or a **high earthquake/natural disaster excess** , comparing cover requires looking past the headline premium.

In the NZ market—where the **Natural Hazards Commission Toka Tū Ake (NHC)** (formerly EQC) provides the first layer of natural disaster cover up to $300,000 + GST, and private insurers cover the balance—special terms and high excesses can dramatically shift your financial exposure.

Use this structured framework to compare your options effectively:

 * * **Calculate the True Out-of-Pocket Risk:** A high earthquake excess is rarely a flat dollar amount in high-risk zones like Wellington or Christchurch; it is frequently calculated as a **percentage of the sum insured** (e.g., 2.5% or 5% of a $1,000,000 rebuild value equals $25,000 to $50,000). Compare what you would actually have to pay from your own savings or mortgage facility before the insurer contributes a single dollar. [InsureNZ]

 * **Audit the Special Terms and Exclusions:** Read the fine print on any "special terms" or endorsements. A cheaper policy that excludes foundation damage, retains a historic unreinforced masonry exclusion, or refuses leak/water ingress cover for a specific cladding type leaves you severely underprotected. Compare whether the exclusions render the policy useless for the specific risk profile of the property.

 * **Match the Sum Insured Basis:** Ensure you are comparing apples with apples regarding how the rebuild is calculated. Check whether insurers are quoting on an **area-replacement formula** or a strict **fixed sum insured cap**. If special terms apply due to a home's age (e.g., pre-1935 construction), check if the insurer caps heritage repair costs or requires a specific seismic standard post-event.

 * **Weigh Premium Savings vs. Exposure:** High excesses are usually adopted to lower an escalating annual premium (driven by recent hikes in building inflation and the NHC levy). Calculate the break-even point: if a high earthquake excess saves you $500 a year in premium, but the excess is $15,000 higher than a competitor's, it would take 30 years of premiums saved to cover that gap in a major event.

 * **Check Mortgage and Lender Compliance:** Most New Zealand registered banks have strict criteria regarding property insurance. If special terms or high excesses breach your lender’s risk policy (e.g., they mandate full replacement without restrictive natural disaster clauses), the cheapest or most readily available policy might still be rejected by your mortgage holder.

 *

If you'd like, let me know:

 * What the **region or location** of the property is
 * Whether the high excess is a **flat fee** or a **percentage** of the sum insured
 * What the **special terms** specifically target (e.g., retaining walls, foundations, or past landslip history)

I can help you **calculate the exact financial exposure** or suggest how to **negotiate with insurers**.