Sum insured and excess

Sum insured is the maximum amount an insurer will pay out on a house insurance claim in New Zealand, set by the policyholder rather than automatically covering full replacement — a different model from the "full replacement" cover that used to be standard.

Why New Zealand moved to sum insured

Insurers largely moved away from full replacement cover after the Canterbury earthquakes, where open-ended rebuild liability proved very difficult to price. Under sum insured, you nominate a dollar figure, and that figure — not the actual cost of rebuilding — is the cap on what the policy pays.

How underinsurance happens

The sum insured is set once, usually at policy inception, and construction costs move independently of it. Between materials, labour and compliance costs, rebuild costs have risen substantially over recent years, and a sum insured that was adequate three years ago can be materially short today. Underinsurance typically isn't discovered until a claim, which is the worst possible time to find out.

Why the figure needs reviewing every renewal

Most insurers provide an online calculator to help estimate an appropriate sum insured based on the dwelling's size, construction and location, but the responsibility for keeping it current sits with the policyholder. Renovations, additions and even general cost inflation all move the number — review it at every renewal, not just when something changes.

How excess works

The excess is the amount the policyholder pays toward a claim before the insurer pays the rest. A higher excess generally lowers the premium. New Zealand policies frequently carry a specific, separate natural disaster excess — for earthquake, flood or storm damage — which can be materially different from the standard excess and is worth checking explicitly rather than assuming it matches.

Common misunderstanding

A sum insured that felt generous when the policy was taken out is not a fixed safety margin — it erodes in real terms every year construction costs rise and the figure isn't updated. Landlords carrying multiple properties are particularly exposed, because reviewing several sums insured is easy to defer.

Related terms

Last reviewed: 1 August 2026 · General information only, not insurance advice.

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