Insurance when buying a house in Wellington region

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lokhor

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#215273 20-Jun-2017 08:51

So, I am currently working through the conditions of an offer I have put on a house in Riverstone Terraces, Upper Hutt. I called State Insurance today to see if I can get cover on the house. They told me they have an embargo in the area due to the quake. I have to find out the policy number / company of the current insurance on the property and have to go through that company. Has anyone else encountered this?

All comments are my own opinion, and not that of my employer unless explicitly stated.

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#1803786 20-Jun-2017 09:05

Interesting I thought this had lifted for everyone. Try AA Insurance, I tried during their embargo to lift my contents cover but wouldn't however they were kind enough to send me a message once this had lifted.

PolicyGuy

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#1803842 20-Jun-2017 09:38

i have heard that this is a common issue if trying to buy a house between North Canterbury / Nelson and Levin / Masterton - the insurance companies are really twitchy about 'Natural Disaster' cover in that region since the Kaikoura earthquake. I understand that the vendor will have to effectively get their insurance company to 'grandfather' the existing policy onto the new owner.
And be prepared for 'sticker shock' on the premium.

itxtme

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#1803851 20-Jun-2017 09:48

Purchased a house in January after the quakes in Wellington. It is a messy process with lots of mixed messages, mainly due to the fact that almost everyone you speak to gives different advice. Here are the facts as happened for us.

- Our insurer in the old house was State (IAG)

- The owner of the new house was insured by Lantern (IAG)

- We got mixed messages as to whether we could change to State given they were both IAG, but my understanding is if you push you should be able to stick with your insurance company (although we didn't) if you are in the same position (ie. same group).

What we did

- We got the details of the insurance from the current owner (they just gave us their policy number), and phoned Lantern. They provided sum covered insurance for us without question.

Confusing parts

- People tell you that you are taking over the old owners insurance, thats not true. Its a new policy, its just the new houses current company is willing to take the risk on a property they already insure that hasnt had an earthquake claim against it.

- You wont necessarily be able to get contents insurance as well. Lantern declined this and again this - I guess to reduce fraud/fake claims. We just kept our contents insurance with State and changed the address.

- You may not be able to increase contents insurance cover at this time. Again to reduce fraud they did not want to let us increase cover.

- Sum insured offered by Lantern on the house was the same as the previous owner, we were/are not able to increase that. This was irrelevant though as the old owner had a realistic sum insured amount.

Hopefully this is helpful, and remember this all relates to February so things may have shifted slightly. Also I would still reccomend anyone purchasing a house to have a clause in their offer subject to insurance, because if you cant get insurance then the bank wont loan you money.

Wheelbarrow01

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#1803936 20-Jun-2017 11:45

lokhor:

So, I am currently working through the conditions of an offer I have put on a house in Riverstone Terraces, Upper Hutt. I called State Insurance today to see if I can get cover on the house. They told me they have an embargo in the area due to the quake. I have to find out the policy number / company of the current insurance on the property and have to go through that company. Has anyone else encountered this?

Yes - anyone in Canterbury who has either bought or sold an existing house since 2011 will have come across this (the exception being new houses built since the major quakes). In many many cases, you will be forced to insure any existing house purchase with the current insurer, on 'substantially similar' terms as the vendor. This means you don't simply take over the vendor's policy, you get a new policy on similar terms (not necessarily similar prices though).

In most cases, any building element (includings paths, pools, fences etc) which were damaged before sale and are not yet repaired, will not be covered for future events until such time as any damage is repaired. This could be by way of the purchaser fixing the damage themselves, or it could be by way of any previous insurance claim having a managed repair completed.

In that regard, it is essential that if you are buying a house which has had a natural disaster claim made against it at any time, to get a 'Deed Of Assignment' signed prior to settlement. This essentially confers any residual entitlement of any claim over to the new owner, even for claims that appear to have been settled.

It is a bit of a minefield, but any lawyer worth their salt will know what is required. If your lawyer doesn't know, it's almost worth picking a CHCH based conveyancing lawyer out of the phonebook and giving them a call for some basic advice - they are all experts these days...

Having said that, if there has never been any natural disaster claim made on the property, it makes the process a lot easier, however you will still very likely only be able to get insurance from the same company with whom the vendor is currently insured. It's par for the course in Canterbury.

antoniosk

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#1803944 20-Jun-2017 11:59

I believe FMG is being a little more open to underwriting in wellington.

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Antoniosk

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#1803964 20-Jun-2017 12:44

Wow i thought this had been lifted in Chch - is it still complicated like it is in Wellington?

At least they still cover. Worse if certain cover is specifically excluded.

Wheelbarrow01

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#1804023 20-Jun-2017 13:48

joker97: Wow i thought this had been lifted in Chch - is it still complicated like it is in Wellington?

At least they still cover. Worse if certain cover is specifically excluded.

Yes Christchurch can still be quite complicated. I have completed several property transactions in the last few years, for myself and also as executor of a deceased estate containing several properties.

I sold a house as estate executor in April. The house had previously had a full managed repair for damage from the 2011 quakes, but it sustained fresh (but minor) damage in the November 2016 quake, so it had an open (and as-yet uninspected) EQC claim at time of sale. There was a sum of cash that had been paid out to me for future driveway repairs which I handed over to the buyer, and all claims (past and present) were assigned over to the purchaser through a Deed of Assignment. Apart from all the paperwork, that was relatively straight-forward.

The problem lies where one party or other neglects to complete full due diligence as required. A couple of personal examples are below:

I bought a rental property about a year after the 2011 quake, and during that acquisition the insurance company stated that the driveway (or my 1/8th share of it) would remain uninsurable until such time that it is repaired. It is a cross-lease property with the driveway shared by a total of 8 parties. Most (if not all) owners have now received their respective cash settlements to cover the repairs, but I suggest that most of them have probably spent it on other things, and the driveway remains unrepaired. I hazard a guess that it will never be fixed. If one owner were to try and organise the repairs, they would then need to try and recover the other 7/8th of the cost from the other owners. I know from experience that just trying to get the others to cough up for minor water main repairs is almost impossible, so I am pretty sure the driveway will never be fixed. That is fine, but I need to keep that repair money aside as I will be required to pay it to the new owner if I ever sell. I see an endless circle of money changing hands for repairs that will never be completed, with inflation eroding the value of that insurance payout with every sale.

In another example, when I purchased my own house in 2015, the vendor signed a Deed of Assignment to me, noting that all repairs had been fully completed anyway. Some time between going unconditional and me taking possession, they must have got a letter from EQC saying that there would be a payment made for 'land damage' of an as yet undisclosed sum. At the eleventh hour, they tried to back track and have the land claim assigned back to them. They tried to argue that the land claim was in recognition of the loss of value to the land caused by the quakes and as vendors they should be entitled to that. I argued that I had paid many thousands of dollars over Rateable Value for the house, so they had no basis to argue diminished value as they got significantly more than it was worth on paper, not less. I also successfully argued that the payment would be needed by me to cover any future land remediation, noting that the back yard was no longer level. They backed off, and the open land claim remained assigned to me. Since then, I have received a 5 figure cheque from EQC with a direction that the money be used to remediate the ground level on my property. I am very pleased I stuck to my guns on that one. Had I not, the vendors would have got a significant windfall to spend on whatever they please, whereas I would have had to bear the full cost of re-levelling the ground at some point.

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mattwnz

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#1804060 20-Jun-2017 14:52

Maybe it is because it is on the side of a hill above the rive, and very close to the major fault line, and maybe insurers see it as a higher risk? I however haven't heard of that sort of problem in the region recently, it usually only occurs after a large quake. You may want to look at other areas to see if you are going to have that problem elsewhere.

froob

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#1804108 20-Jun-2017 15:11

It seems to be fairly common these days to include a condition that an offer is subject to obtaining satisfactory insurance - similar to a finance condition. If you're putting in an offer to a deadline, it might make sense to include that condition, to give you some time to work through these insurance difficulties. Get a lawyer to review your offer, if you haven't already.

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mattwnz

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#1804117 20-Jun-2017 15:21

froob: It seems to be fairly common these days to include a condition that an offer is subject to obtaining satisfactory insurance - similar to a finance condition. If you're putting in an offer to a deadline, it might make sense to include that condition, to give you some time to work through these insurance difficulties. Get a lawyer to review your offer, if you haven't already.

The good real estate agents will now have something in their standard clauses for this. I was told by one real estate agency that they always include this as standard to protect buyers, which is a good thing, considering they are working for the sellers, but they still have to be fair to buyers. But any good lawyer should also include this as a condition, along with others.

nickb800

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#1804118 20-Jun-2017 15:21

mattwnz:

Maybe it is because it is on the side of a hill above the rive, and very close to the major fault line, and maybe insurers see it as a higher risk? I however haven't heard of that sort of problem in the region recently, it usually only occurs after a large quake. You may want to look at other areas to see if you are going to have that problem elsewhere.

You'd think so, but I don't think insurers actually care that much or use such refined risk modelling (at least on the natural hazard side of things). Hence the broadbrush North Canterbury to Wanganui enhanced due diligence requirement.

It helps that the first $100k of natural disaster is covered by EQC, and they effectively charge a flat rate 'premium' to your private insurer that in no way reflects the risk of your location

lokhor

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#1804244 20-Jun-2017 18:56

I ended up finding out the value insured and the company (Tower) and rang up to sort it out. They will insure it but they would not provide a certificate of insurance until I go unconditional so they provided a letter of intent instead. I am going to call Youi tomorrow to see if they will provide one.

All comments are my own opinion, and not that of my employer unless explicitly stated.

alasta

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#1804324 20-Jun-2017 20:28

Wheelbarrow01:

Yes - anyone in Canterbury who has either bought or sold an existing house since 2011 will have come across this (the exception being new houses built since the major quakes).

I bought a place off the plans a couple of months ago and was advised by AMI to ensure that the developer has contract works insurance. If I understood correctly there may still be difficulties obtaining a new insurance policy on a dwelling built after the earthquake, but as a backup plan you are likely to be able to take out insurance from whatever company was providing the contract works insurance to the developer.

I guess insurers are nervous about new builds being affected by aftershocks.

Stu1

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#1805405 22-Jun-2017 21:05

Youi are pretty tough to , I looked at switching to them in Upper Hutt as well apprantlly I am in a flood zone , they were fine about earthquakes but not flooding from the river

jimbob79

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#1805410 22-Jun-2017 21:31

Speak to my mate Mark. He is an insurance broker and he deals with this kind of bull***t from insurance companies all the time. He mainly deals with business and personal insurance, but he does do home and content insurance as well. Mark has helped a lot of people who have been caught in the same process as you.

04 235 5557

http://www.theinsurancebroker.co.nz/

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