Increased protection from AA Insurance change

AA Insurance has decided to reintroduce full home replacement cover for damage caused by things like fires, floods and storms that don’t qualify as natural disasters.

Full replacement cover for non-natural disasters is now available for home and landlord policies, whether new or renewing.

However, the change will have no direct impact on customer premiums.

AAI head of product, Aaron Dickinson, said customers may see a change in their premium, due to inflation or other factors that influence price like claims cost - but not from the move to replacement cover.

The change had been prompted by customer feedback on calculating sum insured figures for properties, which customers have had to do since 2012, he said.

“We appreciate some customers have had difficulty calculating an accurate sum insured and understand it can be stressful contemplating whether the amount calculated is enough.

“So we wanted to make it less stressful and provide them with greater peace of mind with their cover.”

The full replacement cover means that customers will receive full replacement cover, even if it costs more than their sum insured.

In the case of damage caused by a natural disaster, a customer’s sum insured will be used to settle the claim.

Dickinson said the full replacement cover was introduced not as an alternative to sum insured, but as an added benefit for additional protection.

“We wanted to give peace of mind to our customers for the most common types of damage they may incur.

“Natural disasters are rare, while fire, floods and storms are more likely to happen in New Zealand, according to our claims data.”

The company’s claims data shows that fire claims in particular are on the rise – and that the majority of those fires are caused by unattended heaters, appliances and cooking.

Dickinson said the total loss of a home due to fire is rare, but it can be devastating for those who lose their property and its contents.

For landlords, the full replacement cover will mean that this type of fire claim would be paid on a total replacement basis, rather than be potentially capped by the sum insured figure, he said.

Customers will still have to take some responsibility though.

Dickinson said that calculating and providing an accurate sum insured figure for a property remains important, as it is a requirement for replacement cover.

“But, as long as customers take reasonable steps to provide us with an accurate size of their home and sum insured calculation, we will look after them, should the worst happen.”