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How to Deal with Your Insurance Company

How to Deal with your Insurance Company

I had a house fire in 2000. This document is a record of what happened and suggestions based on my experience.

  1. How do I know all this?
  2. Are you under insured?
  3. Does your insurance cover everything?
  4. Does the insurance cover incidental costs?
  5. Arrangement between Insurance Companies?
  6. Arrangement with Lawyers?
  7. Cost of suing the Insurance Companies?
  8. Who is responsible for the damage?
  9. Quality of Repairs of the house
  10. There is always fine print
  11. There is trickery with pricing
  12. What about the Consumer Guarantees Act?
  13. How long will it take to rebuild?
  14. Should you be honest?
  15. Is the Insurance Company honest?
  16. What should be replaced?
  17. Items that do not fit above
  18. What did I do after settlement?

  1. How do I know all this?

    In 2000 we had a house fire. It was started by two chimney sweeps. They were using a standard practice of burning the birds-nest inside the chimney. They poured some methylated spirits into the chimney and dropped a burning rag in. It flew out and settled into the gutter. They retrieved it and carried on. Unbeknownst to them, the tar/wax coated building paper caught fire and soon the whole roof was alight.

    When the heat permeated their boots and socks, the chimney sweeps realised that the house was on fire. The front door was open, they stomped in and tried to use the phone. A sign next to it told them they had to dial 1 to get an outside line, but they didn't read it.

    Fortunately, I was working from home when I heard the commotion and called the fire service. They took 12 minutes to arrive. The fire alarm went off a few minutes after they arrived.

    I had already ushered the wife and kids outside the house. I had followed instructions and not paused to pick up anything along the way.

    While waiting for the fire engines, with the help of the sweeps, we had pushed/driven the cars out of the garage, retrieved the pet cockatoo and dragged the 4 X (45Kg) gas bottles away from the house.

    Three engines turned up and another appliance to supply food to the firemen. They were there for hours because the main fire was under the roofing iron. They had to climb the hot roof and make holes to stick their hoses in. One fireman was injured as his ladder fell backwards.

    They soon ran out of water. We were on a rural property. The water being sprayed was collecting in our water tanks. So, the firemen reused that water. The majority of the damage was actually caused by the firemen and the boiling, caustic water getting sprayed everywhere.

    The first floor (not the ground floor) was totally gone. The flames had started burning the ceiling, in places, on the ground floor. All visible copper pipes had exploded and twisted as the water inside had vapourised.

    The assessor from State Insurance arrived in the afternoon. He made three statements (more on them later) -
    • Mr. Zzz, you are underinsured.
    • Where is the ring ?
    • If the house had burnt down fully, we would not have believed that you owned so much.
    • If the house had burnt down fully, we would not have believed how much cabling is in the house.

    At a time like this you find out how friendly your neighbours are. Three of them offered us their house keys. We moved into one of the neighbour's house. Late at night we suddenly realised that we needed infant milk powder for the one year old. All shops were closed by then and my wallet had burnt in the fire. So I went over to the burnt house with a torch and managed to find tins of infant milk powder (all sooted up).

    The next morning, the fire restarted and the fire appliances had to come back.

    When the fire is raging, you think they will extinguish it soon and you can get back in, in a few weeks time. It takes days to sink in that you have to survive a whole year before you can get back to your house.

    Advice :
    • Pick up just your wallet. Its a pain buying things without credit cards for 10 days.
    • Install a smoke detector in the attic space as well.
    • The 10 year models are not as advertised. I have tried 3 different brands, and about 15% of them have had battery failures in the first two years. Install wired smoke detectors if you can afford them.

    We were not traumatized by the fire. But we were traumatized by by both the Insurance Companies.

    The Insurance Council of New Zealand has a Voluntary Fair Insurance Code [1].
  2. Are you under insured?

    It may surprise you to know that the majority of people are under insured. A month before the fire, I had increased my contents insurance. State Insurance would not believe my figure so sent three people to take photos of everything.

    Yet on the day of the fire, the Assessor comes in and after just one glance says "You are under-insured".

    In New Zealand, contents insurance also covers carpets, drapes, light fittings, above ground pools etc. Crazy, yes, because you don't take them with you when you move. Basically, anything that is not bolted down is contents. Therefore you all are under-insured.

    Some of you will have replacement cover. Most people grossly under-estimate what the current values are, and hence the total.

    What happens if you are under-insured? Say you have two couches, but the total insurance value only covers one couch. One couch gets damaged. The Insurance Company will say that they have been carrying the risk of two couches and is going to pay for half the couch!

    Advice :

    Every two years, walk around and list all the items. Take photos of anything more expensive than $500 and price it realistically. If you are not sure, over-estimate it, the premium will not increase that much.

  3. Does your insurance cover everything?

    So, you have house, car and contents insurance and think you are fully covered. Surprise, you are not. Most insurance does not cover lawns and garden.

    In our case, the outside was damaged by the firemen and builders (not the fire itself). Yet it was not covered.

    A child car seat was in the attic and got destroyed. Guess anyone? It was not covered because it was part of the car insurance and the car was not damaged. When I protested, they asked me to lodge a claim under the car insurance. The subtle point here is that there is yet another excess to pay. Basically, the insurance companies will try everything possible to get out of paying you.

    All is not lost as these things are theoretically covered by the chimney sweeps Insurance policy, because they started the fire.

    Advice :
    • Ensure that whoever you hire has a public liability insurance policy, much larger than the cost of rebuilding your house. This applies to any and all trades.
    • Don't ask a friend to help you install anything major. If the Insurance Company hears of this and even if it is not the cause of the fire, they will try and not pay you. If the Insurance Company does pay you, then the chances are that they will sue your friend.
    • Similarly, do not help a friend install anything major such as a fireplace or deck.
  4. Does the insurance cover incidental costs?

    While the house is getting re-built. It will take about a year to rebuild. You are still paying the mortgage and now a rent. Surely the rent is covered! Yes, but only 3 months under the contents policy and 3 months under the house policy. But you can only benefit from one policy, so you are covered for 3 months only. The rest can be claimed from the other Insurance Company.

    Loss of income is not covered. With 3 kids and a pregnant wife, I had to take many days off work (more later). Theoretically this can be claimed from the other Insurance Company.

    As for the extra petrol usage - you can try claiming it from the other Insurance Company.

  5. Arrangement between Insurance Companies?

    In New Zealand, the Insurance Companies have an agreement between themselves. To avoid litigation, they cover the other companies' loss by 50% only.

    So If State spend $400,000 in repairs, Vero would pay State only $200,000.

    This affects you in many ways -

    • Everything that is claimable by you from Vero (the other party's Insurance Company), Vero will also only pay you 50%. This is wrong but you have to take them to court to get Justice.
    • State has to reduce their expenditure, so they will try and clean everything before declaring that the items need replacing. And all the money they spend is deducted from your claim.
    • State has to document their expenditure, so they will make you work for it. Every week, they would give me a page of 60 items that they had determined were lost. These would range from baby food to tinned food to loose rice to iron to couch. I would have to take a day off to drive around getting quotes (and estimating how much rice I had in the pantry). Then they would pay me that sum of money.

    What is the problem with this ?

    • It takes them weeks to attempt to clean things. You don't know if you can buy a new one or if you are getting the old one back. For example you need the toaster now, if you buy it, you may end up with two!
    • They will spend money cleaning everything. If it was up to you, you wouldn't spend money cleaning say female baby clothes when the last baby is a male. But they will clean it and effectively charge you for it. This cost is ridiculously high. They cleaned one such dress 3 times, it was still gray and had also shrunk. Ditto for our leather jackets.
    • You are not getting reimbursed for the day off or for the petrol.

    Advice :
    • After a major loss such as a flood or fire, for Content Insurance, ask the Insurance Company, up front what their estimate is. Their assessors are very good, they know what it will cost them, right away. Insist that amount to be paid to you right away. Then you can decide what you want to replace and when.
    • If you are in the situation that I found myself in, just estimate the amount and value instead of getting quotes.
  6. Arrangement with Lawyers?

    I racked up $150,000 worth of expenses not claimable from State (my Insurance Company). I forwarded this to Vero (the other Insurance Company) and they offered me half. I walked out saying "I will sue you". They weren't bothered and this is why.

    Only some lawyers/solicitors will handle insurance cases. Between Vero and State, they had every such lawyer on their retainer. Even the lawyer I had dealt with for 20 years, claimed "conflict of interest" and refused to act for me.

    It is very clever tactics, but I wouldn't call it cricket.

  7. Cost of suing the Insurance Companies?

    I spent weeks ringing around to find a lawyer. I finally called the law society for help. They gave me a name of a lawyer who had just graduated and would handle insurance cases. I had a chat with him and he agreed to take on the case but mentioned the following -
    • It would take at least 3 years to settle the case.
    • Even if I won, the judge may, at most award only 50% of his fees.
    • It would cost $150,000 for his first appearance in court. Total cost unknown.

    Naturally, I bowed out. At that time, in New Zealand, lawyers were not allowed to benefit from the outcome of a case. That is, he could not have taken it on, on a commission.

  8. Who is responsible for the damage?

    I was insured with State Insurance, one of the sweeps was insured with Vero, and the other with State. This made it a 3 way bun-fight !!! Vero claimed that the one insured with State was all to blame, so they weren't liable for anything. Luckily that chimney sweep left the country, making it a cleaner, two way fight again.

    Until the very last day (a year later), State did not admit liability. They were still looking for a way out!.

    Some of the things that I know they tried -

    • They rung around to see if the chimney sweeps had caused any other fires - they had not.
    • They rung around to see if burning the nest was a standard procedure - it was.
    • They found that the house had been built with a different building paper to what was on the building consent. It was still a permitted brand and was used as there was no stock of the other one when we needed it. They actually told me that I was not covered because we had deviated from the building consent!
    • I am sure they dredged up my history to see if I was involved in any house fires.
  9. Quality of Repairs of the house

    I was assured that the Insurance Company had experience on fixing homes that were damaged, from floods. But this turned out to be untrue. I had to fight my way to receive a like-for-like and a fair remediation. The policy was replacement and the house was only 18 months old. This had a large part in my insisting on a newish house.

    These are some of the examples of what the Insurance Companies will normally do -

    • The plasterboard on the ground floor got drenched. I was told it was standard practice to dry and repaint. Even the builder and architect agreed with it. In NZ, all building products must be warranted for 50 years, so I asked the manufacturer to provide me with this warranty. Obviously they refused. So it was replaced and surprise to the builder, it disintegrated like weat-bix when taking it off the walls.
    • The roof trusses were charred and sooted up. I was told it was standard practice to paint the charred ones with silver paint and carry on. This is dangerous rubbish. It depends on the safety factor used for design, the original thickness of timber and the remaining thickness of timber (after you remove the charring). Again, I asked the manufacturer for a 50 year warranty, they said no, so they got replaced.
    • We had particle board flooring upstairs, which had survived. It had been drenched in boiling water and then had been open to the weather for days. The Insurance Company was going to just cut out burnt bits and replace them with squares (6-12 inches). I didn't win this fight because the builder showed me how difficult it was to remove the old bits. This was my fault, I had put in stainless screws at 6 inch intervals to stop the movement which was creating creaking noises.
    • The marble tiles on the ground floor had boiling, corrosive and sooted water poured on them. They now had black marbling. The Insurance Company insisted that's how they used to be and were not going to replace them. Luckily the importer remembered us because the had been especially imported for us, for the extra veins that we had wanted. So, they got replaced.
    • They were going to join the burnt bits of cables with new ones. These were cat5/6, coax, telephone, speaker and alarm cables. With no idea of how much the remaining bits had been damaged by corrosion and heat. I insisted that they replace them fully.
  10. There is always fine print

    We had replacement policy for the house and contents. As noted in the previous section, the Insurance Company was not keen to give us a brand new house. Contents was a mixed bag.

    See Is the Insurance Company honest?

  11. There is trickery with pricing

    The Insurance Company is GST registered. So they get back 15% from the Government, but they charge you full price. Think of what they owe you as a bank account. They only put in 85% of the sum insured. And they receive amazing deals from retailers and suppliers, but they charge you RRP. That is, they put in about 40% less into the account.

    I figured this out. There wasn't much I could do about the house costs as it was going through the architect to the builder. But I could do something about the contents.

    I insisted that I wanted to purchase the big ticket items such as whiteware and furniture myself. This is because I could get amazing deals (this part is true, I can). Here is the important bit -

    If a fridge had an RRP of $115, the Insurance Company would pay only $60, but charge your account $115.

    Now they had to come clean and admit that they get 40% plus off on major items. I would have received a discount of 15-24%. By admitting to this trickery, they still saved 20% as compared to my buying the items myself.

    Advice :

    Insist that they hand over the sum insured to you and that you would buy the items yourself. And watch them squirm. Try and come to an arrangement about the price that is allocated to you.

  12. What about the Consumer Guarantees Act?

    In New Zealand, the warranty on Goods and Services are covered by the Consumer Guarantees Act [2][3]. What this means that when you buy something new, the seller (importer and manufacturer) have to provide you a warranty that most people would consider reasonable.

    This means that I would consider it reasonable that a toaster would last me 10 years. And that a Television would last me 15 years. These are not unreasonable figures as my parents in in-law owned these items and they lasted twice as long.

    The insurance company is insisting that many items such as TV, Home Theatre System and Ovens were not damaged by the fire (and the corrosive water).

    The argument I raised was -

    • Say I have 15 years worth of warranty under the CGA for the TV.
    • It fails next year.
    • I take it to the retailer.
    • Their service guy opens it up and sees soot.
    • The Retailer, importer and manufacturer are not going to cover it.
    • Therefore I want a written statement from State that they are taking over the obligations under the CGA.
    • They responded, we never thought about it before.

    Advice :

    Use the above argument and insist on a statement or that they replace the damaged items.

  13. How long will it take to rebuild?

    Based on my experience, it takes the Insurance Companies three months for demolition, drawing the plans and getting them approved by you and the Council. Then another three months to find a builder (on tender). And it can easily take six months to rebuild. That's a total of one year.

    Yet they only provide you rental costs for 3 months. The total amount may be fixed or capped. The house policy covers you for 3 months and the content policy covers you for 3 months. But you can not benefit from two policies, so you only get 3 months. The remainder is claimable from the other Insurance Company.

    When I was notified of this, I was livid. I told them that they had failed in duty of care. Since they knew it was going to take a year to build, they should have at least offered me an option of 12 months rental cover.

    Once the rental payment from the contents had expired, I argued that the contents policy was no longer in force and I was not double dipping. Just for me, they agreed to re-interpret their policy and paid out for another 3 months from the house policy.

    It is important to note that this amount is not additional, it's included in the total sum insured.

    Advice :

    Insist that the Insurance Company hands over the entire sum to you (recall, you are under-insured). Then you can spend the money as it suits you.

  14. Should you be honest?

    Absolutely, you should be honest with the Insurance Company. If you lie, and you are found out, you are liable to be charged criminally for fraud.

    The second statement from the Assessor was "Where is the ring?" My wife had an expensive diamond solitaire ring. I was honest and told them that she was wearing it.

    The Assessor told me later, because of this, they believed other things I said later on.

    The next morning (after the fire) I scratched the ground directly under where the Master Bedroom used to be and recovered the remnants of the other jewellery and handed it all over to them. I have to admit that I regretted this action later. They had not asked me about the other jewellery, so I could have kept quiet. But claiming for it would still have been fraudulent.

  15. Is the Insurance Company honest?

    The Insurance Companies are honest, but will try to wriggle out of all claims. The two Assessors I was assigned, were really decent people to deal with. They offered me a cash advance of $5000 on the afternoon of the fire. I declined thinking I still had my wallet. I had to request it the next day because my wallet had burnt in the fire.

    I had the fullest, replacement insurance that was offered to me for the house and contents. Naturally, I had assumed that all the contents came under this umbrella. But they had a long section of fine print. And the main exception is referred to as Sets and Pairs. Another is referred to as Like for Like. Some examples -

    • One of the pair of gold and diamond earings had survived. What I expected was cost of getting the pair from India. Instead I was offered half the price of the total cost as if they were purchased locally.
    • All door handles were destroyed upstairs, the downstairs had survived. That particular handle was not available anymore. The Insurance Company wanted to buy just the upstairs ones. Luckily the builder adjusted the costs and replaced the downstairs ones to match.
    • Books were not covered for replacement. I was not allowed to benefit by buying new replacements locally. Instead I had to track down second hand copies of the same age and buy them from overseas. They ended up costing twice as much. But I had not Benefited. Worse, this higher amount was deducted from my account!
    • See previous section for Plasterboard, Roof Trusses, Marble tiles and Cables.
    • The Insurance Company automatically replaced fridges, freezers, dish washer, washing machine and dryer, as per standard practice. Because the corrosive water and air causes them long term damage. But they refused to replace anything electronic, including a TV that had had water pouring over it. They also refused to replace ovens and cooktops.

      The heat was so intense that 3 feet above the ovens, china dishes had fractured. China / Porcelain is fired between 600°C and 1400°C [4]. For this to fracture, the temperature was up there. I requested that at the very least they get them serviced, they refused. Then all of a sudden replaced them. Apparently they had asked the builder and he told them, that surely they knew my reputation and I was not going to give up.

    • The Insurance company was still refusing to replace the TV and Home Theatre System. By this time, I had a gut feeling that we were near the end of our account. So, I suggested that we could stop bickering if they just handed the remainder over to me. They turned up the next day with the cash and an army of people to take away the TV, speakers and the home theatre system. Did they sell it to someone?
    • See previous sections about rent, car seat and building paper.

    Advice :

    • Look at your policy and ask. Ensure that you have a policy that has a clause such as "includes Sets and Pairs" and that it does not have a clause such as "Like for Like". Instead you want "Replacement" or "As New".
    • Insist that the Insurance Company hands over the entire sum to you (recall, you are under-insured). Then you can spend the money as and when it suits you.
  16. What should be replaced?

    Damage from the fire occurs because of the burning action (charred trusses), the heat (all copper pipes had burst), the water (from the firemen), the hot water (it's going past flames and hot metal), corrosive air and water (most modern materials produce toxic and corrosive fumes when burnt) and rain water.

    Advice :

    For the following items, either insist that they are replaced or that the Insurance Company provides a certificate from the manufacturer or supplier that states that "they are still going to honour the warranty as if the item had never been in a fire."

    • All whiteware
    • All kitchen appliances
    • All electronics
    • All plasterboard that got wet
    • All particle board that got wet
    • All trusses and framing that got charred
    • All soft stone products such as (marble and sandstone)
    • All cables
    • All items within 2-3 ft (1m) of the ceiling, such as crockery
    • All copper pipes in the house. (Many of the pipes on the ground floor - in the walls and in the concrete floor, developed leaks over the next few years!)
  17. Items that do not fit above

    There are many things you need to do to ensure that you are believed about what was in the walls and ceilings of the house and what you owned.

    There are two types of policies for House Insurance - Nominated price or a price based on the area of the house.

    Advice :

    • While the house is being constructed, take photos of walls, especially of the cables. Otherwise the Insurance Company may not believe what you had.
    • Once the house is finished, take photos of all electrical, audio and video outlets. The house plans always show a bare minimum of such fittings.
    • Take photos of all your expensive light fittings, such as pendants and chandeliers.
    • Keep receipts of any expensive contents and belongings.
    • Every two years, just go around the house and systematically take photos of all four walls from the centre of the room. You don't need to label each one.
    • Keep all copies of receipts and photos of above off site or in the cloud or on two USB sticks, one placed in the attic and one in the basement.
    • For house insurance, I prefer nominated/agreed price. But this requires you to obtain a valuation every few years (I would suggest at least every 3 years). If this does not suit you then shop around for Insurance Companies that will offer you a policy based on the area and quality of your house.
  18. What did I do after settlement?

    The settlement process took almost three years (after the fire) to complete. This hamstrung me in that I felt I could not make changes to my insurance until this was over.

    Actions :

    • I searched for insurance companies that offered Pairs and Sets in their policy. I also read the fine print more carefully.
    • For the house policy, I was looking for a nominated / agreed price. At that time, most offered an Area based policy only. I was not confident that I would get the same quality of house after a disaster under this policy.
      After the Christchurch Earthquakes, most companies only offer an agreed value policy. This reduces their liability because most people will not pay up for the cost of a valuer every few years.
    • I shifted to FMG (Farmers Mutual Assurance), they generally only insure rural or lifestyle properties. Amazingly they were also cheaper than State.
    • Some years later, I shifted to MAS (Medical Assurance Society). They only insure professionals. However, an existing member can nominate you. With all my insurance policies with them, they were cheaper still.
    • Some Insurance Companies, provide a sample form to tally up your contents. I used this as a basis and made a comprehensive list of the our contents. Because, I was bound to miss some items, I rounded up the retail price (including GST) of all items.
    • I went to an agreed value policy for the house and paid for a valuer. I am obtaining a new valuation every 3-4 years. If this does not suit you, then you can request a real estate agent to provide you with a suggested value. However, a proper valuation includes other costs such as demolition.
    • Every time we make an improvement to the house such as a shed or a fence, I inform the insurance company right away (with the amount that I paid).
    • Every time we purchase a new item (contents) worth more than $5000, I make a note and increase the insurance at the next renewal.
    • In our policy we have to list any personal items (items that are portable) valued over $10,000. Every time we purchase a personal item above $8,000, I inform the insurance company and send them a receipt. The lower value allows me to track the item for inflation in subsequent years.
    • I get any jewellery worth over $5,000 valued every 3-4 years. And I send this to the Insurance Company.
    • To reduce the premiums, I always take on an increased excess voluntarily. Both our policies come with $500 excess, I have raised that to $1000. It does mean that I can not claim for items such as spectacles, watches or phones. But I want the insurance for big ticket items.
    • I am more diligent in asking that all trades (that are working close to the house) have a sufficiently large public liability insurance.
    • I have refused to help friends fell a tree that could fall on the house and to install a fireplace. Otherwise the Insurance Company will still pay the friend but then sue me for the whole amount. And recall, I can not get a decent or inexpensive lawyer to defend me.
    • Later when we were extending the house, I discovered that every piece of steel that we exposed had heavy surface corrosion, presumably because of the fire. In my mind, both the Engineer and State (the Insurance Company) should have foreseen this. I insisted that the original Engineer visit the site and report on actions to take and declare whether it was still safe. This was necessary, otherwise the new Insurance Company could use this as a reason to deny claims in the future.


  1. Insurance Council of New Zealand
  2. Consumer Protection
  3. Consumer Guarantees Act 1993
  4. Temperature Ranges for Firing Glazes

A Step-by-Step Process to Deal with your Insurance Company

Disclaimer : I am not associated with any of these companies. I do not receive any financial incentives from any of them. These are my honest views based on experience and research.