Your quick guide to inflation and insurance in NZ
How does inflation affect your house and contents insurance? Take a look at what it means for you and your policies.
Understanding inflation and insurance in New Zealand
There’s been a lot of talk about inflation lately. But what does it mean? Better yet, what does it mean for you? Inflation has a sneaky way of affecting your life where you’d least expect it – so we’re here to help make sure you’re prepared and thinking ahead.
Break it down: Inflation 101
What is inflation? The quick definition is ‘the general increase in prices of all the goods and services in the economy1’.
More simply – it means prices go up, increasing the cost of living, leading to money losing its value. Basically, the money you have today won’t buy as much as it did yesterday.
For example, a pair of trainers that would have cost you $100 in 2012, will now cost $120 in 20222 – even if it’s the same trusty chucks you’ve always bought.
So what does inflation in New Zealand look like?
Much like the rest of the world, New Zealand’s main drivers of inflation are caused by increasing fuel prices and the cost of housing and household utilities3.
Why is fuel so expensive?
Quick answer: the price of international oil has skyrocketed and everyone’s feeling the pinch. In New Zealand, from March - July 2022, petrol increased from $2.79 to around $3.31 per litre.
These price increases have a knock-on effect, so when the cost of something like fuel goes up, it reaches us in ways we don’t immediately see.
For example, because petrol’s expensive, transport companies that deliver our food to the supermarket have to increase their prices to match, which then affects how much food costs. That explains the weekly grocery bill.
And how is housing affected?
Quick answer: construction firms have been struggling to get their hands on the materials, which means everything takes longer to build and due to the wait, labour costs go up. So in a nutshell – building a house may take longer and be more expensive than ever.
For example, back in March 2021, the average house build would cost you $381,404*. Fast forward a year to March 2022, and to build the same property it would cost you $450,057. That’s an 18% increase in just 12-months3. Ouch.
*Not including Queenstown, Southland or Northland, which is a higher cost.
So how does inflation affect my home and contents insurance?
As the price of everything goes up, the value to rebuild your home or replace your contents also goes up. So it’s important to check your sum insured has you covered just in case.
For example, if you find your house unexpectedly flooded due to winter weather, the current material and labour shortages mean it will cost more to repair or rebuild. And your sum insured might not cover the inflated prices.
And for your contents, pesky supply-chain issues drive up the cost of furniture. So it’ll be more expensive and will take longer than normal to replace your favourite armchair or washing machine.
So check how much your stuff is worth and review your sum insured. Then you’ll have the peace of mind you’re covered, not just for today but for tomorrow too.
Want to stay a step ahead? Take a look at your sum insured by logging into My Tower and check what your policy covers so you’re thinking ahead.
1 Source: RNZ
2 Source: RBNZ
3 Source: Stats.gov.nz