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With natural disasters prompting home and contents insurance premiums to soar 30%, a third of policy holders now rate insurance as a ''luxury''.
And now insurers are switching from the traditional full replacement house insurance to sum insured, policyholders are being advised to shop around.
At their next renewal date, homeowners will be asked by insurance companies to designate a cost per sq m to rebuild their home.
Canstar Blue, a financial research and rating company, released its insurance consumer survey yesterday, which revealed that while 83% of the 2500 consumers surveyed had enough cover, 60% believed they were paying too much in their premiums.
Following a series of natural disasters overseas and in New Zealand during the past two years, insurance companies were faced with higher premiums from their overseas re-insurers, which in New Zealand meant premium increases of about 30%, on average, for home and contents policies, Canstar New Zealand general manager Derek Bonnar said.
''Sixty percent in the survey felt they were paying too much for their home and contents insurance, and 17% have reduced their cover due to financial constraints,'' Mr Bonnar said in a statement.
One-third of respondents regarded their current policy as a luxury.
''Home and contents insurance can be one of those grudge purchases that we hope to never use, but that everybody should have,'' Mr Bonnar said.
The survey rating for overall satisfaction was headed by AA Insurance, followed by Westpac, AMI Insurance and BNZ, then Tower, State and Vero (equal).
Of the forthcoming changes facing homeowners' policies, almost 70% of the respondents said they understood the difference between sum insured and indemnity cover.
''With the price rises we've had and possibly more on the way, it makes sense for consumers to find the best deal they can,'' Mr Bonnar said.
Aside from shopping around, he suggested policyholders ask for discounts based on loyalty, age or house security features, and choose a high excess if it can be afforded which can lower the cost of premiums.
Last month, valuers and quantity surveyors around Dunedin were contacted to establish the cost to assess a house for replacement. Valuers estimated costs started about $350 to $450, while quantity surveyors estimated $1000 to $2000.