Homeowners are being warned not to run the risk of under-insuring their homes in a bid to avoid paying for rising premiums.
Risk-prone parts of the country, such as Wellington, are starting to feel the effects of higher rates.
A Wellington woman was stunned to be told the premium on her house insurance was increasing by $5000 a year.
Ursula Egan said her insurer told her the premiums for her property in the Wellington suburb of Karori were rising from around $2200 to almost $7200.
"We haven't changed any of our conditions - this is just a rollover of our premium,'' she said.
A Tower Insurance representative said they had changed the way they were allocating the insurance, and that it was based on the address.
Tower warned in April that customers in earthquake-prone areas would have to pay more.
However, Mrs Egan said their neighbour's premium had only gone up by $1000.
"Tower does an online quote, so I put all my details in and the addresses for my neighbours and the premiums came out at $3000.
"There's no - that I know of - geological reason why our premium would be three times what theirs are.''
A Tower spokesman said it used earthquake data software, RMS, to determine the exact location of a property, its proximity to the fault line and what the house was built on - or out of.
The spokesman said it was entirely logical that two neighbours could have hugely different risk profiles and therefore, insurance costs.
Core Logic insurance director Richard Deakin said in the face of rising premiums, under-insurance was a real risk.
"It's a sad fact of life now that I have to nominate a sum-insured value for my property which is my estimate of how much it will cost to rebuild my house should the worst happen,'' Mr Deakin said.
"If I haven't covered myself adequately then there is a risk of myself being under-insured and if we are then hit by a major event, if I'm significantly under-insured, I might not be able to afford to build at all.''
He said if this happened, there was no back-up plan.
"The Government doesn't have a legal obligation to step in.''
Massey University insurance expert Michael Naylor said Ms Egan's 300% increase was probably over the top.
He said insurance companies were worried about under-pricing Wellington properties, in case a major earthquake hit.
"Most of the companies are not very keen to hold insurance in Wellington as there will be a major quake there at some stage and they had a bad time after Christchurch,'' Dr Naylor said.
"[They] lost a major amount of money in Christchurch and are keen not to lose it in Wellington.
"A few of the major Australian firms came close to bankruptcy with Christchurch and they're keen not to have that happen again.''
In Palmerston North the council was taking steps to plan for natural disasters and climate change, Dr Naylor said.
