Choosing the Right Excess for Your NZ Buildings Insurance Policy

What Is an Insurance Excess?

An insurance excess — sometimes called a deductible — is the amount you agree to pay yourself when you make a claim, before your insurer pays anything. If you have a $500 excess and you make a $12,000 claim for storm damage, your insurer pays $11,500 and you pay $500.

In New Zealand, buildings insurance policies typically include multiple types of excess that apply in different situations. Understanding each type — and choosing your voluntary excess level thoughtfully — can save you significant money on premiums without meaningfully increasing your financial risk.

Types of Excess in NZ Buildings Insurance

Standard (Base) Excess

This applies to most standard claims — fire, theft, storm damage, burst pipes, and similar events. The base excess is set by your insurer (often in the range of $250–$500) but you can typically increase it voluntarily to reduce your premium. You cannot usually reduce it below the insurer's minimum.

Voluntary Excess

An additional excess you choose to add on top of the standard excess in exchange for a premium reduction. For example, selecting a $1,000 voluntary excess in addition to a $500 standard excess means you pay the first $1,500 of any claim. The premium saving varies by insurer, property, and risk profile — typically 5–20% of your annual premium for a moderate increase in voluntary excess.

NHCover (Natural Hazards) Excess

Since 1 July 2024, under the Natural Hazards Insurance Act 2023, the Natural Hazards Commission applies a flat $500 excess per insured home for both building and land claims. This replaced the previous variable percentage-based system. This excess applies specifically to the NHCover portion of a natural hazard claim — your private insurer may apply their own excess separately to the portion of the claim they cover.

Earthquake Excess

Some private insurers apply a separate, higher excess specifically for earthquake-related claims — particularly for the portion of the claim above the NHC cap. This is common for properties in high-seismic-risk zones (Wellington, Canterbury, parts of the Bay of Plenty). Always check whether your policy applies a special earthquake excess and, if so, how it interacts with the NHC flat excess.

Flood Excess

Following the 2023 North Island weather events, some insurers introduced specific flood excesses for properties in identified flood-prone areas. These may be fixed amounts (e.g., $5,000–$20,000) or percentage-based. If your property is in a flood zone — check your council's GIS hazard mapping — ask specifically whether a flood excess applies and what amount.

How Excess Affects Your Premium

The relationship between excess and premium is straightforward: a higher excess means a lower premium, because you are absorbing more risk yourself. The premium saving from increasing your excess is typically largest at lower excess levels and diminishes as the excess gets very high.

As a rough guide for a typical NZ residential property:

• Moving from $500 to $1,000 voluntary excess: 5–10% premium reduction
• Moving from $500 to $2,500 voluntary excess: 10–20% premium reduction
• Moving from $500 to $5,000 voluntary excess: 15–25% premium reduction

These figures vary considerably between insurers and property types. Your adviser can provide specific comparisons for your policy.

How to Choose the Right Excess Level

The right excess level depends on two things: your financial resilience (can you comfortably pay this amount if a claim occurs?) and your claims likelihood (how often do you expect to claim?).

The "Self-Insurance Threshold" Approach

Think of your excess as defining the level of damage you will self-insure — i.e., cover yourself without making a claim. Many homeowners find it makes sense to set their excess at a level where, for minor damage, they would simply repair it themselves rather than claiming. Claiming for small amounts raises your premium at renewal (claims history is a pricing factor) and consumes time and administration.

For most homeowners, this suggests a voluntary excess of $1,000–$2,500 is appropriate. For higher-net-worth homeowners with liquid savings, a $5,000 or even $10,000 voluntary excess can deliver meaningful premium savings in exchange for what is, for them, a manageable self-funded cost.

Consider Your Emergency Fund

A simple rule: don't set your voluntary excess higher than the cash you could access within 30 days. If you have $2,000 in easily accessible savings, a $5,000 voluntary excess leaves you exposed if a claim occurs at a financially inconvenient time.

First Home Buyers and Lower Excess

If you have just purchased your first home and stretched your savings to do so, a lower voluntary excess (or no voluntary excess above the insurer's standard) may be appropriate in the early years, even if it costs slightly more in premium. As your savings recover, you can increase the excess at renewal to reduce costs.

When You Make a Claim: Excess Stacking

Be aware that in some situations, multiple excesses can apply to a single claim. For example, after an earthquake that also causes water damage, you might face:

• NHC excess: $500
• Private insurer standard excess: $500
• Private insurer earthquake excess: $2,000 (if applicable for your area)

Always ask your adviser to walk you through how excesses stack under your specific policy before you commit. This is particularly important in Wellington and other high-seismic-risk areas where earthquake-specific excesses are more common.

Review Your Excess Annually

Your excess should not be set and forgotten. Review it at each renewal in the context of your current savings position, any changes to your property risk profile, and current market pricing. In a soft market (as NZ is experiencing in 2025–2026), insurer competition means better excess/premium combinations are available than in recent years.

Speak with one of our licensed advisers to find the right excess level for your situation. They can run comparisons across multiple NZ insurers to show you exactly how much premium you save at different excess levels for your specific property.