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Material Damage

Understanding Material Damage Insurance in New Zealand: A Comprehensive Guide by Gerrards Insurance Brokers

In an uncertain world, insurance policies act as a safety net, protecting businesses from unforeseen circumstances that may cause significant financial losses. A vital pillar among these policies is Material Damage Insurance. This article will guide you through the nitty-gritty of Material Damage Insurance in New Zealand and its implications for different industries.

Topics covered

What is Material Damage Insurance?

Material Damage Insurance is a form of insurance that provides coverage for physical damage or loss to the insured’s property. This includes structures, equipment, inventory, tools, and more, depending on the specific policy. It serves to indemnify the policyholder against losses incurred from unexpected events such as fire, burglary, storms, and other damaging incidents.

Who Needs Material Damage Insurance and When?

In essence, any business with physical assets that are critical to its operation can benefit from Material Damage Insurance. This coverage is particularly relevant to industries such as building, manufacturing, farming, and hospitality, where the material assets form the backbone of the business. Material Damage Insurance becomes a necessity when a business wants to ensure financial stability in case of any unexpected and disruptive events that might lead to a halt in operations.

Material Damage Claims in Different Industries

Here are some claims scenarios for different industries:


Damage due to accidents, natural calamities like floods, or theft of construction equipment or materials could be potential claims in the building industry.


This could include damage to machinery due to mechanical breakdown, power surge, fire, or malicious damage.


Potential claims may arise from food spoilage due to refrigeration failure, fire, or theft of cash and assets.


Claims in farming may include damage to farming machinery, livestock loss, or damage to barns or farm buildings.


If you need a more specific claim example for your business, contact us and we can provide you with these. 

Commonly Asked Questions

What do I need to watch out for with material damage insurance?

When it comes to Material Damage Insurance, it’s essential to understand all aspects of the policy to ensure comprehensive coverage. Here are some key points to consider:

Setting Your Sum Insured Too Low:

A common pitfall in material damage insurance is underinsuring, which is setting your sum insured too low. This could result in a shortfall when making a claim, leaving your business financially exposed. It’s crucial to have an accurate valuation of all your assets that the policy covers, factoring in replacement costs, to ensure the sum insured is adequate.

Using the Wrong Valuation for the Fire Service Levy (FSL):

The FSL should be calculated based on the indemnity value of your property, not its replacement value. Overvaluation could lead to higher insurance costs due to an inflated FSL. It’s always recommended to consult with an insurance broker or a professional valuer to ensure that you are using the correct valuation for the FSL calculation.

Sticking With the Standard Excess:

The excess is the amount you agree to pay towards a claim before the insurer covers the rest. While many policyholders stick with the standard excess, it might not always be the best option for your business. Higher excess could result in lower premiums, but it would also mean a higher out-of-pocket cost when a claim arises. On the other hand, a lower excess would mean a higher premium but lower cost at the time of a claim. It’s about finding the balance that suits your business’s financial situation and risk appetite.

Overlooking Policy Exclusions:

Every insurance policy comes with exclusions – specific situations or events that the policy does not cover. For Material Damage Insurance, common exclusions might include damage due to gradual deterioration, war, or certain natural disasters unless specifically mentioned. It’s essential to read through these exclusions carefully. If certain events, such as theft or natural disasters, are crucial for your business context but are excluded, consider negotiating with the insurer to include them or look for a policy that provides the necessary coverage.

What does the sum insured mean?

The sum insured is the maximum amount that your insurance company will pay in the event of a claim. It’s essential to accurately value your assets to avoid being underinsured.

What does the FSL (Fire Service Levy) mean and why do I have to pay it?

FSL is a levy collected by insurers on behalf of the New Zealand Fire Service to fund their operations. It’s a component of the insurance premium.

What is the difference between Material Damage and vehicle insurance?

While Material Damage insurance covers a broad range of physical assets, vehicle insurance specifically covers vehicles and is usually separate from a Material Damage policy.

How long does Material Damage insurance last?

Most policies last for one year and must be renewed annually.

Does Material Damage insurance cover earthquakes?

Yes, if natural disaster cover is selected as part of your policy. Do keep in mind the excess for this can be as high as 10% of the claimed amount. Check this so you aren’t surprised at claim time. 

Can I get Material Damage insurance for one day only?

Typically, Material Damage insurance policies have a term of at least one year. For short-term cover, it would be best to consult with a broker.

How do I get a Material Damage Insurance certificate?

Upon purchasing a policy, the insurance company will provide a certificate outlining the coverage details.

Buying Material Damage Insurance

What is the cost of Material Damage Insurance

The cost of Material Damage Insurance can range from as little as a hundred to hundreds of thousands, depending on the sum insured and risk of the assets. The cost is general calculated at a rate At Gerrards Insurance Brokers, our team can help you navigate these complexities, ensuring you get the best value and cover for your business.

Should I use a broker for Material Damage Insurance?

We recommend using a broker for Material Damage Insurance, as the intricacies and pitfalls associated with selecting the appropriate coverage can be challenging. Our experienced brokers will understand your unique needs, assess potential risks, and help you choose a policy that offers comprehensive protection.

Navigating the world of insurance can seem daunting, but with Gerrards Insurance Brokers, you’re never alone. Let us help you protect your business and provide you with peace of mind. Reach out to us today to start your Material Damage Insurance journey.