Understanding reinstatement condition

Before you take out an insurance policy, it’s important to understand what’s covered and what’s not covered under the terms of the policy. Commonly, a home insurance policy won’t pay for work on any part of your home that hasn’t suffered loss, or cover costs related to improving or enhancing your home beyond the condition it was in before the loss.

What does ‘reinstatement condition’ mean?

Reinstatement condition is a building standard or specification similar to but no more extensive or better than the condition of your home when it was new or last renovated. All home insurance policy's provide different types of cover. At AA Insurance, we will repair or rebuild your home using current equivalent techniques and building materials that readily available in New Zealand.

If you have a claim with another insurer, and your home needs to be rebuilt or repaired, they may only pay the reasonable costs to meet the reinstatement condition and might not cover any costs to improve or enhance your home.

Some factors that may be considered by insurers when settling a claim could include heritage features that can't be replicated, building materials that are no longer available, or costs related to sourcing materials from outside New Zealand. It's important that you look closely at your policy wording so that you understand the terms of your cover and its limits.

Examples of reinstatement condition

Eden’s deck was damaged in a storm. He made a claim on his home insurance policy, and his insurance provider accepted the claim and agreed to rebuild the deck. Eden thought it would be a good opportunity to add steps to the deck, so he asked the builders to put three steps into their designs. As this was different to the condition of the deck before the event, it was not covered by his insurance policy, so he agreed to pay for the enhancement himself.

A fire damaged the flooring in the living room of Hana’s home. The flooring in the living room was made out of rimu, like all the floors in her home. Rimu flooring is no longer readily available in New Zealand, so the damaged flooring in the living room was replaced with the nearest available equivalent, which in this case, was European Oak. As the other floors hadn’t been damaged, the remaining rimu flooring wasn’t replaced to create a matching appearance.

Key takeaways

When you claim for damage to your home and your insurance provider chooses to repair or rebuild, they will consider many different factors that will be dependent on the type of cover you have chosen. Often insurance claims will allow to repair or rebuild to the same condition your home was in when it was new or last renovated, using techniques and building materials that are readily available in New Zealand at the time of your claim. Insurance doesn't usually cover the cost of any improvements or enhancements you might want to make to your home whilst it’s being repaired or rebuilt.