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A much bigger flood excess changes the question from “Am I insured?” to “If a flood happens, could I afford to pay my share of the damage without putting my finances or home at risk?” In New Zealand, this is particularly important because flood damage can be expensive, natural-hazard cover has specific rules, and a property’s flood risk can affect both insurance costs and future insurability.

You don't necessarily need to be able to afford the full cost of rebuilding your home yourself. But you do need a realistic plan for the amount you could be required to pay, the possibility of damage exceeding your policy limits, and the cost of living elsewhere while repairs are completed.

1. Workout the amount you are actually risking
   Start by comparing your old and new policy wording, not just the headline premium.
   • Flood excess: Is it a fixed dollar amount, a percentage of the sum insured, or a special excess that applies in addition to the standard excess?
   • What triggers it: Does it apply to river flooding, surface water, stormwater overflow, or other events? Are there separate rules for landslips or other natural hazards?
   • What is covered: Check the building, contents, garages, retaining walls, fences and other structures separately.
   • Limits and exclusions: An excess is only one part of your exposure. Some damage or associated costs may not be covered, or may have separate limits.

Ask your insurer to confirm the maximum excess you could face for a single flood event, including whether separate claims or sections of the policy could attract multiple excesses.

2. Apply a practical affordability test
   The key number is not your total savings. It is the amount you could pay immediately without borrowing, missing mortgage payments, or being unable to cover essential living costs.
   Work through these four questions:
   • Cash available: How much could you access quickly in savings, after allowing for bills and emergencies?
   • Other resources: Could you realistically get help from a partner or family, or access other funds? Don't count on borrowing unless you know it will be available.
   • Recovery costs: Could you cover an insurance excess, any uninsured repairs, and temporary accommodation or extra travel costs?
   • Time to recover: If you paid the excess today, how long would it take to rebuild your savings?

A useful rule of thumb is to keep your ordinary emergency fund separate from the money you would need for a flood. If paying the excess would wipe out your emergency savings, that is a warning sign.

3. Compare the excess with the premium saving
   Suppose your insurer has increased your flood excess from $2,000 to $10,000.

   • Old flood excess: $2,000
   • New flood excess: $10,000
   • Additional amount at risk: $8,000
     Illustrative figures only, not a quote or prediction of flood losses.

4. Factor in your property’s actual flood risk
   The same excess can be sensible for one home and too risky for another. Look at:

   • Previous flooding or water entering the property, including nearby streets and properties.
   • Whether the home is near a river, stream, low-lying land or a known floodplain.
   • Council flood maps and flood-risk information in your LIM or property records.
   • Whether practical measures, such as improving drainage or protecting vulnerable entry points, could reduce damage.

The Natural Hazards Commission Toka Tū Ake recommends checking local council floodplain maps. Its flood preparedness guidance is a useful starting point. You don't need to calculate an exact probability of flooding. The aim is to understand whether you're accepting a relatively remote risk or a risk that is credible enough to plan for.

5. Check what New Zealand's natural hazards cover actually provides
   One important distinction: the natural hazards cover provided through the Natural Hazards Commission is not the same as comprehensive private flood insurance.
   For storm and flood damage, the Commission provides cover for certain areas of residential land, but damage to the home itself from flooding is generally handled under your private policy. Some land, landscaping, driveways and other property features may also fall outside natural hazards cover.

   • Read the Commission's guide to natural hazards cover alongside your insurer's policy schedule. Confirm which excess applies to which part of a claim, rather than assuming the standard natural hazards excess is the amount you will pay for flood damage.

6. Decide which option fits your finances

   • Keep the excess low
     Best if you have limited accessible savings, would struggle to borrow for repairs, or want to protect your financial security even at a higher premium.
   • Accept a higher excess and build a dedicated reserve
     Consider this if you can cover the full excess now, the premium saving is worthwhile, and you can keep the money available rather than spend it elsewhere.
   • Shop around or negotiate different terms
     Ask your insurer or a broker whether a lower flood excess is available, and compare alternative policies on equivalent cover. A cheaper premium is not a good deal if the exclusions or coverage limits leave you substantially exposed.

The Insurance Council of New Zealand also recommends weighing the excess against the loss you could financially withstand and comparing the full policy terms, not just the premium. See its insurance health check.