An insurance expert is warning that major changes to home insurance policies in the next three months will put the onus on homeowners to get their valuations absolutely right or risk losing their insurance cover.
Insurance companies are poised to introduce new policies that some say will leave homeowners exposed and at risk.
In June, the traditional method of house insurance, based on calculation by the square metre, is set to change to what is known as a sum-insured formula, based on the property's value.
That means owners will be insured for the actual cost of rebuilding the house.
Duncan Webb, a former law professor at Canterbury University who is now a partner in the Christchurch law firm Lane Neave, says it will put the onus on owners to pay for yearly valuations to keep their cover up to date and their insurer supplied with accurate information.
"And if they make mistakes, even innocent mistakes," he says, "it can have catastrophic effects, not only in terms of under-insurance - for example, if you get the square-metrage of your house wrong - but in fact of no insurance at all."
Dr Webb says the Canterbury earthquakes exposed how costly total replacement policies are to insurance companies.
NZ seen as last holdout for current method
The private insurance brokerage Apex General says getting and renewing residential house cover will initially be more complex, but the changes have long-term positive benefits for the market.
Managing director James McGhie says they will bring New Zealand closer to international standards of best practice.
He says New Zealand is the last country in the world where homeowners can pay for their house cover by square metre, without taking into account any other crucial factors - such as thousands of dollars' worth of upgrades to the property, or new driveways and retaining walls.
Premiums 'unlikely to go up'
The Insurance Council says while all home insurance policies will be recalculated according to the new formula, that shouldn't push premiums up.
Chief executive Tim Grafton says it is the same system that was in place 20 years ago, and similar to how overseas countries calculate their policies.
He told Morning Report people should not look at their property's rateable value, or market price, but rather think about how much it would cost to rebuild the house should it burn down.
Mr Grafton says insurance companies will help people work out their new policies, and there will be online calculators for people to use as well.