Insurance shock for some residents

Some Christchurch homeowners were yesterday shocked to discover that the red-zoning of their properties would not entitle them to claim the replacement cost of their house from their insurer.

One disappointed Tower policyholder reported in a blog that Tower had said it would cover only the cost of repairing the damage to his house, even though he had full replacement cover and his house was in a red zone.

Tower group managing director Rob Flannagan confirmed yesterday that for red-zoned houses that were deemed repairable the firm would pay only for the cost of repairs, not the replacement cost of the house.

And, generally speaking, if the house was undamaged, even though the area was a red zone, there was no claim under the insurance policy, Flannagan said – although it would depend on the individual policy.

"That'll be the same with all insurers, I suspect," Flannagan said.

"That's why there are the two options Government has given."

Red-zone homeowners have two options – accepting a Crown offer of purchase for the entire property at the 2007 rating value; or a Crown offer for the land only, with owners dealing with their insurer about the house.

Asked whether Tower would cover the cost of moving a repairable damaged house to a new section and then pay for repairs, Flannagan said he did not know.

AMI policyholder Richard Cosgrove was told yesterday that AMI would reassess his red-zoned Dallington home to see if it was repairable after the June 13 aftershock. If so, AMI would pay only the cost of repairing the house, not replacing it.

Insurance Council chief executive Chris Ryan said people should look at their policies, test their policies, and negotiate with their insurance companies.

"Get expert advice. And take your time," he said, adding that insurance companies needed to explain their positions.

IAG New Zealand chief executive Jacki Johnson said the company was working to confirm its position on "various scenarios" that had emerged as a result of Thursday's land announcement. "At a minimum, we would pay the cost of repair."

The Press