Anyone with domestic house insurance pays for Natural Hazards Insurance, which is a compulsory levy collected by insurers for the Natural Hazards Commission, formerly known as EQC.
The NHC covers up to the first $300,000 of damage to an insured home, including land up to 8 metres around your home and driveway.
Since the Auckland floods in January 2023 losses from landslides have totaled $302 million, more than four times the cost of all other natural hazards combined. The Natural Hazards Commission (NHC) has received almost 10,000 claims for damage from landslides in the past three years, nearly 10 times more than the previous three years.
The NHC doesn’t just cover landslides, it also covers damage from earthquakes and other natural disasters.
However, the NHC has the discretionary power to decline cover where a Natural Hazard Section Notice is recorded on a property title.
These record on a property’s land title that a building consent was granted even though the land is subject to one or more natural hazards (eg. flooding, erosion, slippage, subsidence, tsunami, or similar risks). It ensures future owners and interested parties are aware of the risks and limitations.
Effectively, they can fully or partly decline a claim for damage caused by the same type of hazard specified in the Section Notice. This can also impact the cover provided by insurers above the $300,000 NHC cap, as some insurers will only pay out once the NHC accepts its portion of the claim.
As insurers are now acting as agents of the NHC when assessing claims, it is up to them to decide whether to decline or accept a claim. At a recent event, representatives of one insurer suggested that a claim would be deemed “invalid” if it related to a hazard that was subject to a Section Notice and declined.
They also considered that having a Section Notice on the property file is a material fact that needs to be disclosed to insurers. Failing to do so is likely to result in a claim being declined if the damage was caused by the same hazard listed on in the Section Notice.
A Section Notice may be applied to one part of a property. However, if a homeowner subsequently decides to get some building work done, which requires a consent, the Section Notice is deemed at that point to apply to the whole property.
Having a Section Notice on a property file could limit the ability to get insurance and also affect the property’s value.
Some other important points to be aware of in terms of Natural Hazards Insurance:
- Retaining walls are covered up to $50,000 per structure, but only for the portions within 8 metres of a building or accessway. Cover provided by the insurer’s policy should be in addition to that amount.
- NHI pays the “conceptual repair” or “undepreciated value” of the damaged land or retaining structures. If the retaining wall is quite old this value may be substantially less than what it will cost to replace it with what is needed now. The same may apply to the insurer’s top up, it will only replace what was there, not what is now required.
What you should do
- Check your property file to see if a Section Notice has been applied. If there is, make sure you disclose it to your insurer.
- If you’re considering undertaking renovations that will require a building consent, be aware of the implications on your property if a Section Notice is in place.
Read more about Natural Hazards Insurance on the NHC’s website: https://www.naturalhazards.govt.nz/insurance-and-claims/about-nhcover.
