The necessity of insurance

Insurance is one of those topics no one wants to talk about but it’s essential that you do.

Buying a home will for many be the largest purchase they ever make and while it’s a great asset to have it can also be sizeable financial risk should something go wrong.

Insuring your new property is essentially compulsory. A bank or lender will not advance your loan if the property is not adequately insured.

Changes post the Christchurch Earthquakes means most insurers now offer only agreed value policies which means the payment should your house be totally destroyed is capped at that agreed amount. Prior to the Earthquakes, complete replacement was common.

This means potential homeowners need to put more thought into their insurance to ensure they get the right level of cover. Set the sum too high and you will be paying for insurance you don’t need, set the sum to low and you will be left with having to pay the shortfall.

Insurers offer calculators which will give you a rough idea of what you will need to rebuild or replace your current home. Your mortgage adviser can also help arrange other professionals to assist you with an accurate valuation. It pays to get the right advice in this regard.

While property insurance is essentially compulsory ensuring you have suitable life and mortgage repayment insurance is equally essential.

How will you meet your mortgage payments if you are too sick, have an accident that prevents you or your partner for working for a period of time or worse, if you or your partner dies?

This is an area of home buying that many Kiwis ignore to their peril.

There are numerous different types of insurance in this area and depending on your personal and employment circumstances the best policy varies widely. It is best to seek advice around how to suitably cover yourself for unexpected events that could lead to you not being able to repay your mortgage and facing tough choices about how to keep your new home.


If you’d like to find out more, please register for one of our first home buyers seminars or download our first home buyers guide here.

Can't wait? Speak to an expert mortgage adviser today.