Understanding your financial situation and options

Transcription

1 Understanding your financial situation and options After the Canterbury Earthquakes Need help or advice on what to do now, and where to go next? Inside you ll find... Things to think about when making your financial decisions Tools and information to help you manage Quick tips from the experts Information on who to talk to and where to get financial advice

2 Got lots to deal with and don t know where to start? Planning to repair or rebuild? Need somewhere else to live? Want to start completely afresh? Feeling overwhelmed by the options and issues you need to think about? Worried about the money? Faced with increased costs and unanticipated expenses having to meet your mortgage and rates payments as well as paying for temporary accommodation and feeling stretched and under financial pressure? Exhausted from balancing a number of worries, or worrying about money all the time? Not sure what the next step is and how to manage in the meantime? You re not alone Thousands of Canterbury residents affected by the earthquakes are under huge financial pressure, trying to make decisions about things that are difficult to understand, and worried about what life is going to look like in the future. If you re struggling to understand all your financial options, or even keep your head above water, take a few minutes to read this booklet. It offers you a way to work through the issues, answer the questions, and get on with making good financial decisions whether you re sorting out your insurance and EQC payments, managing your everyday costs or getting your debts under control. Who are we? The Commission for Financial Literacy and Retirement Income (formerly known as the Retirement Commission) is best known to New Zealanders for our Sorted website. We provide free, independent and impartial financial information; tools; and guidance to help New Zealanders make informed decisions about their everyday money matters. Our independence means that you can have confidence and trust in the information and guidance we offer in this booklet. This is particularly important if you don t know where to turn for help with your financial issues, or are feeling overwhelmed by the amount of information and advice on offer. Making financial decisions: three things to remember 1. Take your time. 2. Use the range of support, information and advice that s available. 3. Consider your options and make decisions that are right for you and your situation. 1

3 Are you trying to come to grips with any of these questions and issues? How can I afford temporary accommodation while I m still paying off my home loan? Should I take my insurer s offer of a cash settlement for my rebuild? My household costs are getting out of control. Is there a way to manage them better? I m nearly 80 I don t want to wait three years for my house to be repaired. Should I just sell up, invest the money and rent? All I have is Government Super to live on. How can I afford to rent while my house is being fixed? I ve been told my rebuild is at least a year away. What should I do with the EQC payment I ve received in the meantime? I m mortgage-free, so can I do what I like with the EQC payment? We re mortgaged up to the eyeballs, but can t live in the house. How do we keep up our loan payments while getting on with our lives? What this booklet covers This booklet will help you to clarify your financial issues, find some possible solutions, and get professional help and advice if and when you need it. Part one Understanding your financial situation, issues and options Page 3 Where are things right now? What could change? What financial issues might you have to deal with? Need some help? Part two Tools and information to help you manage Page 8 Use a money plan to manage your cash flow Get your home loan working for you Take charge of your other debts Looking to borrow to make it through? Part three Where to go for help or to talk through your options Page 11 Your bank A lawyer Your insurance company A financial adviser Making a complaint Directory: for support, information and advice Page 20 Checklist and quick tips Make your next steps easier: take a look at the checklist and quick tips on the back pages of this booklet. You ll find suggestions on who to talk to and what questions to ask, and some useful tips from the experts. 2

4 Part one Understanding your financial situation, issues and options Where are you right now, and what s coming up? Repairing or rebuilding? Selling or buying? Yet to decide? Whatever you re doing, chances are you have some major decisions to make with most of them involving money. If it s all getting too much to handle, now could be a good time to clear your head and take a fresh approach. The best place to begin is to work out: your financial situation right now what s likely to change (or stay the same) the major financial issues you might have to deal with the options available to you whether you need professional help to make your decisions. Where are things right now? It s relatively easy to work out your current financial situation. You could use the money planner at to help you to: identify your current income and expenses (so you know how you re spending your money) calculate the value of your assets (the things you own, such as your house) and how much you owe. By adding up your income and your assets, and subtracting your expenses and debts, you ll have a good idea of where you stand financially. This will help you to decide what you can afford to do. What could change? Many things in life significantly impact our financial situations (for worse and for better). Take a few minutes to review your situation, and whether you can expect change in: your income your family life, such as parents, relatives or friends coming to live with you, or possible separation your living costs, both in the short term (such as higher power bills and car maintenance costs) and in the medium term (such as the rental on temporary accommodation) your home loan and other debts your job, and possibly a loss of income between jobs your living situation, especially if you re facing a long wait for a repair or rebuild anything else. 3

5 What financial issues might you have to deal with? Temporary accommodation If you need to move out while your home is being repaired or rebuilt, there are a few financial things to think about: Your insurance does it cover: - your temporary accommodation expenses (such as the costs of a motel or rented house, and furniture storage)? Check the limits in your policy - the entire time until you move back home? If not, you might qualify for the Government s temporary accommodation assistance, but will it cover the full costs? See - your moving and storage costs, especially if you have to pay them more than once? If not, check the Red Cross website, to see if you qualify for an assistance grant. Your home loan and other outgoings: do you have enough money for your home loan and rates payments, as well as temporary accommodation? Have you contacted your bank to see if you qualify for interest rate or payment relief? Rates: if you re finding it difficult to pay your rates, contact your local council as soon as possible. If your property is uninhabitable owing to earthquake damage, you might qualify for rates relief from the council. You might also qualify for the Government rates rebate scheme (see Moving more than once: if you need to rent for an extended timeframe, you may end up moving a number of times, which will mean additional costs. Transport costs: is it going to cost you and your family more to get to and from work, school and other activities? Selling and buying If you ve decided to sell your home and buy again, you need to think about: The costs of buying: if you need to borrow to buy, how much can you afford? Your home loan: talk to your bank about how best to manage your loan and whether you can transfer the debt against your old property to the new one without paying penalty interest. Legal and consultant costs: you might have to pay a lawyer extra to sort out unusual or complicated purchase conditions, and consultant fees to meet those conditions such as a requirement for a structural engineer s or geotechnical report. Check the Red Cross website, to see if you qualify for an Independent Advice Grant. Insurance: it s important to understand whether the home you re selling or buying is earthquake damaged and particularly whether it is economic to repair before signing any sale and purchase agreement. If buying, you ll need to negotiate insurance for your new home, and you may have to pay higher premiums in the post-earthquake environment. Make sure you have enough insurance before you settle. Talk to your insurer about transferring your insurance to your new property or, if this isn t an option or you don t have an insurer, talk to the vendor s insurer about taking on the vendor s policy. Also check with your lawyer about any existing insurance claims on the new property and your entitlements. Negotiating the right settlement date for you: remember, you ll be responsible for the rates on your existing property, as well as insurance and home loan payments, right up until the settlement date. 4

6 Repairing and rebuilding With all the stress and hassles that come with the repair and rebuilding process, it s important to think about: whether your insurance and/or EQC payments will cover all your repair or rebuilding costs. Check your insurance policy some replacement policies cover all additional costs, including foundations and retaining walls, while other forms of policy may only cover a portion whether you need your insurer s consent to begin your repairs whether you want to do other renovations or changes at the same time. While this could make sense, it would be at your own cost. Talk to your insurer and EQC to see if it s possible and what s involved; you may need to opt out of the Canterbury Home Repair programme how much you can afford to spend: will you need to get another home loan, or extend your current one? how much you can afford to borrow, and in what timeframe: make sure you can manage the repayments, and bear in mind that while interest rates are low now, they may increase. Managing your EQC payment It s important to treat your EQC payment with caution. Before you decide what to do with it, check with your bank and insurer whether you re entitled to spend the money. If you have a home loan, talk to your bank about what to do with the payment (for example, pay off your mortgage or put it on a term deposit). If you receive an EQC over-cap payment of $100,000 plus GST, don t spend it. This, along with any other payments you receive from EQC for house damage, will ultimately need to be paid to your insurer, who s responsible for managing the repairs or rebuild. Remember to set aside money for the EQC excess (typically 1%), which you ll need to pay to either EQC or to your insurer. See the explanation in the box on page 6. If you don t have a home loan, you ll receive an EQC payment that you can manage as you wish until your insurer requires it for the repairs or rebuild. Take your time to make your decision, and invest the money wisely until it s required; it could be the key to reaching your long-term goals. Consider putting it somewhere safe that offers you: - minimal risk of losing value - access, so you have the flexibility to make a quick decision if you want to (for example, you may not want to be locked into a term deposit) - competitive fees and charges - a good return or fair interest rate. Note If your bank receives an EQC payment then it will keep the payment if it has a financial interest over your property (even if your home loan is repaid in full). If you d like to access the money you may be able to discharge your home loan, which will remove the bank s interest. Consider this carefully, as it might have implications if you need to borrow again later on. Quick tips Ask your bank if it charges a penalty for breaking a term deposit set up solely for your EQC payment: some banks don t impose this charge. You could use the interest earned on the EQC money in the bank to help pay your EQC excess. 5

7 How the EQC payments work If your repairs are non-structural and have been estimated at less than $15,000 plus GST, you ll get a cash payment from EQC for you to spend on your repairs. If your repairs have been estimated at $15,000-$100,000 plus GST for a single event, the work will be managed by Fletcher EQR (unless you opt out). EQC will pay the tradespeople directly; you won t get a cash payment. If your home has significant damage (over $100,000 plus GST from a single event), you ll get an over-cap payment from EQC (usually $100,000 plus GST less a 1% excess). - If you re mortgage-free, the EQC payment will be made directly to you. - If you have a mortgage on your property, the payment can go to your home loan provider and stay there in trust and on hold until your insurer asks for it, when it will be used for the repair or rebuild of your home. The loan provider will use the money to reduce (or pay off) your home and other loans to give you interest rate relief, and will normally invest any left over in a term deposit. Any interest earned goes to you, and you can use it as you wish. The EQC excess how it works If you re entitled to the EQC over-cap, it s worth $100,000 plus GST (a total of $115,000). You (or your home loan provider if you have a home loan) will actually receive $113,850, which is the total amount less the 1% excess of $1,150 which EQC will deduct. When it s time for your house to be repaired or rebuilt, the insurer will ask you (or your bank or home loan provider) for the full $115,000. You will need to pay the 1% excess of $1,150. If you re referred to Fletcher EQR for a managed repair, you ll be responsible for paying the relevant excess (either a minimum of $200 or 1% of the final repair cost, less any excess already deducted for emergency repairs or contents). So you also need to budget for this. Opting out of Fletcher EQR If you opt out of the Fletcher EQR repair programme, you ll be responsible for managing the repair process, along with any payments to your contractor(s). So when you receive an invoice from a contractor, you ll need to satisfy yourself that the work has been done properly, then send the invoice to EQC for reimbursement. You ll need to manage the process carefully to ensure you can pay the full amount owed to the contractor on the invoice due date, without being out of pocket. Before you make any decisions on accepting a cash payout from your insurer, take time to consider all the risks and options. It s really important that you: talk to your bank: if you have a home loan your bank needs to know about your plans and may need to agree to any proposal from your insurer talk to a lawyer about your legal risks get some advice on your financial risks and how best to manage your situation. 6

8 Insurance or EQC should you take the cash? In many cases your insurer or EQC will manage your repair or rebuild project, covering all the costs involved and maintaining your insurance cover throughout. In some circumstances, some insurers and EQC provide cash payouts to speed up the claim process. This might seem the answer to all your prayers, but there are downsides. The main one is that it transfers all the risks of the repairs or rebuild from the insurer to you, and makes you responsible for starting, managing and paying for any and all of the work. This might be OK for minor repairs, but if your property is likely to require major repairs or a total rebuild you need to think about the following risks very carefully: It might take you a long time to find a builder, and even longer for the builder to start work (possibly much longer than it would take your insurer). The cost of building materials could therefore go up before the work starts. You ll have to do all the negotiating on the costs and might find it hard to get as good a deal as your insurer could. Once the builder is on site they may uncover more damage or have to do more work than originally thought. If you ve accepted a full and final cash settlement, you ll need to meet the additional costs yourself because you won t be able to make another insurance claim. For example, you might find that your foundations can t be repaired and need to be replaced, so you ll be responsible for any costs additional to those allowed for in the original insurance payout. You might be landed with a repair or rebuild bill that s more than the cash payment you received from your insurer. If repairs are not done properly you won t be able to go back to your insurer; you ll need to sort out the issue with your builder. You ll need to make sure you can meet any additional costs from your income, or that your bank is prepared to lend you the money against your home loan. Your insurer may require you to sign a full and final disclosure form. This means you may need to arrange your own contract works insurance for the repair or rebuild of your house, and a new policy at the end of the build process. Even if you take a cash settlement from the insurer for your house, you ll still own the land and be responsible for the rates. It s important that you do not cancel your existing house insurance policy, even if your home is uninhabitable, as this ensures you have EQC land cover for any future events while the policy is in force. Most insurance companies will offer you a discount on your policy if your home is uninhabitable. If you accept a cash settlement from your insurer or EQC and don t complete the repairs, this may affect your property s future value and insurers willingness to provide cover. If you receive a cash settlement from EQC for land damage, you re responsible for repairing the damage if it s practical to do so. If you choose not to complete the repairs, this may affect your property s future value and put future insurance (land and property) at risk. Need some help? Can t decide what to do? Need more information? Help is never far away. Turn to page 20 for a guide to the professionals and community organisations you can talk to. 7

9 Part two Tools and information to help you manage Once you ve worked out where things stand, your current financial position and the financial issues you might have to face down the track, you can look at ways to better manage your finances and cope more easily with the hassles and pressures you deal with every day. Here are just some of the steps you could take: Make a plan for your money to manage your cash flow. Get your home loan working for you. Take charge of your other debts (like the money you owe on credit cards and hire purchases). Use a money plan to manage your cash flow Quick tips Review your money plan, or set one up if you don t have one. Reassess your priority payments; make sure you re meeting your obligations. Look at reducing unnecessary spending. Get advice if you re struggling to make ends meet. A money plan or budget is a great place to start the money-management journey. If you don t have one already, use the money planner at It s for everyone, not just those having trouble making ends meet. Simply put, your plan should identify how much money is coming into your household (your income), and how much is going out (your spending). The difference between your incomings and outgoings is either Remember, help is available if you need it whether you have tough financial decisions to make, need help through a difficult patch, or want some guidance on what to think about when making future financial decisions. an amount you can spend or save, or an amount you can t afford. That s when you need to look at ways to cut down your costs. If your living costs (such as power bills) are increasing or you have some unexpected expenses (such as car maintenance costs), you might need to review your plan to work out how you ll continue to make your home loan payments and other critical expenses. This could include: prioritising and ranking your regular payments: what payments do you need to keep up (such as home loan payments and power bills) and what could you minimise or suspend in the short term (such as your contributions to saving schemes like KiwiSaver)? reducing or eliminating spending where possible, such as on your internet and mobile phone use, and luxury items like magazines. Need help? The Sorted website has useful tools and tips for budgeting and setting goals, as well as free booklets to help you. The New Zealand Federation of Family Budgeting Services has a free budget worksheet you can download at If you need personal help, call 0508 BUDGET ( ). 8

10 Get your home loan working for you Quick tips Talk to your home loan provider about your options. Review and if necessary restructure your home loan; make sure you re getting the best interest rate and a repayment term that suits you. If you can t manage your payments, talk to your provider or get professional advice. There are a number of things you can do to get your home loan under control or make it work better for you. Review your loan Now could be a good time to check things like your loan payment amounts and the interest rate you pay. You might be able to save money and smooth your cash flow by changing your loan s structure such as by switching some or all of it from a floating rate to a fixed rate. Check out any fees that apply, and try to negotiate them down. You could also take your home loan to another provider, but look carefully at the costs and possible savings. Get an offer in writing so you can compare providers, and ask the new provider what fees it will waive or pay to get you as a new client. For example, it might pay your legal fees or not charge an application fee. Remember to ask about insurance cover can you transfer your current policy to your new home loan? Repayment holidays Some home loan providers allow you to take a loan repayment holiday or mortgage holiday for up to three months. However, this option is best used as a last resort, because while you don t pay anything during the holiday period, the interest is still charged to your home loan account. So when you restart your payments the loan term is extended and you pay more in interest overall unless you increase the payments. Talk to your provider about how this might work for you. Can t manage your payments? If you re having trouble making ends meet, contact your loan provider before you get behind with your payments. When you meet, have a summary of your financial position handy: the things you own, the things you owe, and your monthly income and expenditure. If you think you ll miss a payment, get in touch with your provider straight away. They may have other options, such as enabling you to pay only interest on the loan for a few months, to help you get your finances back on track. Insuring you and your home loan You can insure your home loan with mortgage protection insurance, which either pays out enough on your death to cover the amount owing on your loan, or covers regular payments if you can t work because of illness or accident. Alternatively, you could take out personal life insurance, which could be used to help pay off the loan in the event of your death. Talk to your home loan provider or insurer about these options. 9

11 Take charge of your other debts Quick tips Get out of debt as quickly as you can. Make a plan to reduce your debt. Consolidate your debts into one loan. Having trouble managing? Get advice. Debts incurred through things like credit card spending and hire purchase arrangements can cost you money big money. Here are some tips that can help you get out of that big black, everexpanding hole. Get out of debt as quickly as you can The longer you take to pay off debt, the more it will cost you in interest. Make a list of all your debts and their interest rates (you ll find these in your loan agreements or on your bills). Then: rank the debts according to their interest rates check your budget to see if you can increase the payments pay off the debt with the highest interest rate first and if you can afford it, increase the amount you pay repay the rest of the debts in interest rate order. Try the debt calculator at it s a great way to work out how to repay your debts quickly. Consolidate your debts If you have several high-interest loans (such as a car loan or credit card debt), talk to your bank about combining them into one lower-interest loan. This might make your monthly payments easier to manage but remember, if you repay your new loan over a longer timeframe than the original debts, you could pay more interest overall. If your bank agrees, you might be able to repay your high-interest debts by increasing your home loan. This will reduce your outgoings, but you may end up paying more because of the longer term. To make it work, you should increase your home loan payments so that the date when you pay off the loan stays the same. Trouble repaying your debts? If you re having trouble repaying your debts, talk to the organisation that lent you the money as soon as possible; you might be able to work out a new repayment plan. You can also get free advice from a trained budget adviser at the New Zealand Federation of Family Budgeting Services, on 0508 BUDGET ( ). Looking to borrow to make it through? If you decide to borrow money, make sure it costs you as little as possible. Even a small change in interest rates can make a big difference to the total you pay over time. Decide how much you want to borrow, then shop around for providers. You ll need to find out about: the interest you ll be charged the fees and other charges that apply your repayment amounts the loan timeframe the payment frequency the total cost of the loan. Finally, ask yourself: Am I sure I want to take on this debt? Know the full cost before you borrow Using the debt calculator at org.nz is a handy way to find out how much interest you ll pay by the time you ve cleared your debt. 10

12 Part three Where to go for help or to talk through your options Financial issues can seem daunting and if left alone can quickly get out of hand. If you re having trouble making some important financial decisions, remember: you don t have to make them on your own. Support, information and advice are available from a range of sources, whether you re trying to make up your mind or just want a second opinion to make sure you re on the right track. It s important to take appropriate, professional advice that you can trust. Who to talk to You could talk to: a qualified professional financial adviser or organisation that specialises in financial advice and related services agencies and community organisations that offer advice and support. For example, the New Zealand Federation of Family Budgeting Services (www. familybudgeting.org.nz) can help you to balance your income and expenses with a budget, and might be able to deal with loan providers like your bank on your behalf. You ll find details of organisations like these in the directory on page 20 and at support-and-assistance family members affected by your decisions friends, neighbours and others in similar situations to your own. Before making any big financial decisions, we recommend that you talk to: your bank (and your home loan provider if it s different from your bank) your insurance company your lawyer a qualified professional financial adviser. All financial service providers and financial advisers must be registered Banks, insurance companies, finance companies, insurance and mortgage brokers or advisers and other financial advisers (or the company they work for) must be registered as financial service providers. You can check if a company or adviser is registered by searching the online register at 11

13 A lawyer Quick tips Before you start talking to a lawyer, confirm the fees they charge for their advice. If you re buying or selling, contact your lawyer as soon as you can and don t sign any offer or contract before you ve discussed it with them. A lawyer can advise you on the consequences of your EQC/insurance claims and what land remediation means for you. The earlier you contact your lawyer the easier the process will be, and the less likely you ll be to make costly mistakes. Try to resolve any problems directly with EQC or your insurer, and ask for responses with reasons in writing. This will help your lawyer to understand the reasons behind decisions. Read letters and documents thoroughly. They might contain the information and answers you re looking for. Put files and documents in order before you meet your lawyer this will help them to understand the situation and save time for both of you. A lawyer can help you by: interpreting and explaining the terms and conditions of your insurance policy and the claims, benefits and payments to which you may be entitled advising what you need to check with your insurer, what you can expect from your insurer and whether those expectations are being met advising on options to resolve disputes with your insurer, such as mediation and litigation giving you specialist advice on complex areas of law, such as land remediation explaining legal procedures, how they work, what you can expect and the relevant timeframes helping you to organise and understand your earthquake-related paperwork, insurance policies and letters describing the Government policies, organisations and legal frameworks that deal with earthquake-related issues guiding you through a sale or purchase, identifying potential problems and resolving them with you providing details of organisations and professional advisers who provide other (non-legal) services. Lawyers charge fees for their services, so make sure you check these first. A lawyer must give you a letter outlining their fees, including how and when they are to be paid, as well as a brief description of the work they ll do for you. To find a lawyer or get legal advice The New Zealand Law Society s Property Law Section website offers a Find a Lawyer search. Visit www. propertylawyers.org.nz. Community Law Canterbury gives free initial legal advice (but is unable to complete sale and purchase agreements), and can help you to find a lawyer. Phone , 0508 CANLAW ( ), or visit 12

14 Your bank Quick tips Keep repayment promises and honour your commitments. Talk to your bank if you re finding it difficult to meet your loan commitments, and before you miss any payments. When asking your bank for help, have a summary of your financial position handy: the things you own, the things you owe, and your monthly income and expenditure. Read everything carefully before you sign and make sure you fully understand what you re signing up for: ask questions, seek independent advice if necessary. Keep written records of important discussions and instructions. Think carefully before changing banks; look closely at the costs and possible savings. The Banking Ombudsman s website has useful information and resources to help you deal with your bank: Your relationship with your bank is very important especially if you have a home loan. Your bank is there to help you, so make the most of its services. Find out whether your bank accounts and other facilities are right for you, and how your bank can help you to manage your money, including your credit cards and home and other loans. Managing your loans and other debts Talk to your bank straight away if you think you ll have trouble making your home loan or credit card payments and before you miss any payments. Remember, there may be other options available, such as a repayment holiday, interest-only payments, and the opportunity to consolidate your loans and credit card debt into one loan with a potentially lower interest rate. Refinancing your home loan Most banks have special financial assistance packages for Canterbury homeowners, including reduced interest rates and fees. Find out whether your bank has a special deal to help you to finance your repairs, rebuild or new home. Repairing or rebuilding your home If you have a home loan and you re repairing or rebuilding your home, talk to your bank: about your insurance and EQC payments: will they go to the bank as the mortgagee of your property? If so, how will it use the money until the insurer needs it: to reduce your home and other loans, or put it on term deposit? before opting out of your insurance or EQC repair or rebuild process, or accepting any cash settlement payments that EQC or your insurer offers. Your bank will want to know that you can manage the project and understand the risks of any budget blowout, and how you d pay any costs additional to the payout you received if you re thinking of building or buying elsewhere while you wait for your land decision: how can the bank help? 13

15 if you need to extend your home loan: how much more can you borrow? about what fees apply: for example, if your loan is on a fixed interest rate, do early repayment fees apply? about any change in your house insurance cover: are the changes acceptable to the bank? If you re mortgage-free, ask your bank about the interest rate it can offer for your insurance or EQC payment. Buying a new home If you re buying another home and need to borrow money, talk to your bank early on. Each bank has its own policies and will assess applications on a case-by-case basis taking into account the applicants specific circumstances, needs and ability to manage the payments. Your property s location (and zoning) may affect the services your bank can offer you, and you ll need to meet its normal lending and security criteria. Your bank will want to know whether: the new property is insured (or insurable) and whether the cover is for full replacement, sum insured or indemnity value only and if so, what sum insured. Your bank will want to make sure the policy and cover are acceptable to them. the property has been damaged and, if so, the type and extent of damage, whether an existing insurance claim (EQC or private insurance) covers the repairs or rebuild and whether the claim is assignable to you. You ll also need to let the bank know if the property is going to be repaired through the EQC process, and if so the scope of works (from the insurer/eqc). Buying damaged property? If you re buying a damaged property you need to: find out whether it s economic to repair have the seller s insurance claim, including their EQC claim, assigned to you. Make sure you fully understand what you re getting into by talking to your insurer and a lawyer before you decide to buy. Your lawyer can help you to avoid potential issues, such as if the property is later found to be uneconomic to repair, by preparing additional terms for your sale and purchase agreement. Ask the bank: whether you can transfer your current home loan to your new property what information it needs before it can pre-approve or approve the loan, such as a valuation, an engineer s report, an independent builder s assessment, a geotechnical report, confirmation of insurance and EQC data how much you can borrow about renewing your loan: will the bank reinstate your home loan at the same interest rate and terms as you had before the earthquakes, or will you be better off negotiating a new loan? about bridging finance: is it available? If so, are there any special interest rates or terms and conditions, and is it a good choice for you? Using a mortgage broker or adviser If you d like some help with finding a home loan that s right for you, or renegotiating your existing home loan, you might like to talk to a registered and professional mortgage adviser or financial adviser. 14

16 Your insurance company Quick tips Make sure you have the latest version of your insurance policy from your insurer. Read and understand the policy, especially the exclusions and conditions. Seek advice if you re unsure about any of the clauses or terminology. Keep your insurance premiums current and paid, even if your claim is not settled. Review your insurance regularly and whenever your circumstances change. Check that the details in your insurance schedule are correct, including the square-metre area of your house. Don t cancel your policy until you ve arranged a new one. Your insurance policy is unique to you, and there are many variations from policy to policy and from one insurance company to another. Read and understand your policy, especially the exclusions and conditions and talk directly to your insurer about the policy and any claims you make. Tracking your claim Keep in touch with your insurer about the progress of your claim and make notes about any phone calls. Find out: the name and direct phone number of your contact person the expected settlement process and timeline when your claim will be paid or processed what you can do to help the insurer make a decision on your claim whether you can have parts of your claim settled while the rest of the assessment continues the difference between taking a cash offer to settle your insurance claim and rebuilding the dispute resolution scheme to which the company belongs. 15 Your claim settlement options Talk through your settlement options with your insurer. If your home is deemed uneconomic to repair, these could include: rebuilding on the current site or a new one buying an existing home buying a house and land package. Check also the basis for any cash settlement, such as indemnity or full replacement value. Buying, building and rebuilding If you re buying, building or rebuilding property, arrange comprehensive home insurance before you commit yourself (such as by going unconditional on your purchase offer). Talk to your bank and a lawyer about the risks you might be taking on. Make sure you have the cover you need. Read and understand your insurance policy and what is and isn t covered, especially the exclusions and conditions. Ask your insurer to explain anything that isn t clear. Ask the insurer: - whether the property is insured or insurable for full replacement, a fixed sum or indemnity only (and if so, for what sum)

17 - if the house seller s insurance can be transferred to you as the new owner (your lawyer may be able to help) - whether any insurance claim on the new property will transfer to you as the new owner, and if so to what extent and with any conditions or limitations. Will the entire entitlement transfer or only part of it? Generally any assignment is on a depreciated value, so you ll need to top up the extra cost of repairs - whether cover will continue once you ve repaired or rebuilt, and under what terms. If you re building or rebuilding, check with the insurer that: you can start building on the section when you want to you can get insurance for both the building project (you ll need comprehensive contract works or builder s risk insurance) and the completed house. Make sure you have enough insurance Insurance may become more expensive and harder to get, especially if you don t have it already. In general insurers are continuing to support existing customers, but new cover, if available, may have special conditions. Insurers remain committed to Canterbury and the availability of insurance will improve. Insurers have indicated that, in future, new and renewed house insurance policies are likely to change. Instead of providing replacement cover (which replaces your house based on its size regardless of cost), cover may be limited to a fixed sum or a dollar limit per square metre. When arranging insurance: get the cover you need: find out what you re insured for and the payment you d get for any claim, so that you have enough for rebuilding in the future choose the right excess for your situation: if you accept a high excess you ll pay less in premiums because your insurer is covering less of the cost, but you ll have to contribute more to each claim try to combine your policies: having as many policies as possible (such as house, vehicle and contents) from one company could save you money and avoid issues of where one cover stops and the other starts remember, insurance policies vary widely. It s easy to compare two policies on price, but the cover they offer may be very different. Take care to ensure you buy enough insurance. Getting it right is really important. If you are under-insured you will bear the risk financially. If you have a home loan, your bank will have an interest in what insurance cover you have. To get insurance advice Not sure what insurance, or how much, you need, or how much it will cost? You can get help from an insurance broker or adviser, or by talking directly to an insurance company. Insurance advisers are financial advisers and as a minimum they must tell you about: any key exclusions and limitations of insurance they recommend the risks and benefits of any change, if you re changing from one insurer or insurance policy to another. These include relevant differences between the policies and any negative consequences, such as a reduction in cover, a loss of benefits or fees to cancel a policy. They must tell you if they don t know anything about your current insurance policy. 16

18 A financial adviser Quick tips Find the right financial adviser for you and your situation (whether you re looking for home loan, insurance or investment advice). Check that your chosen adviser or the company they work for is on the Financial Service Providers Register at and is a member of a dispute resolution scheme. Before you start working with your financial adviser, confirm how they ll be paid and the fees they ll charge. Visit for information on how a professional financial adviser can help you, and what to look out for when seeking advice, some questions to ask financial advisers, and things to listen for. If you don t have internet access, you can phone the FMA on A professional financial adviser can help you to manage your money, whether you need a financial plan, help with your financial issues or investment advice. Their aim is to understand your goals and current financial situation and offer solutions that meet your short-, medium- and long-term needs. It s important to make sure that you deal with a professional financial adviser who s properly qualified to provide you with the advice and services you need. Types of financial adviser Financial advisers include financial planners, investment mortgage and insurance advisers, brokers and people working for banks and building societies who provide advice about money and investing. All financial advisers are required to exercise care, diligence and skill and not act in a way that s misleading, deceptive or confusing. There are three types of financial adviser: Authorised Financial Advisers (AFAs), Registered Financial Advisers (RFAs) and Qualifying Financial Entity advisers (QFE advisers). They will tell you which products they can advise on. The Financial Markets Authority (FMA) The FMA is the government agency responsible for regulating New Zealand s financial markets. It monitors financial advisers to ensure they comply with their obligations, and is responsible for licensing and supervising AFAs and QFEs. Choosing a financial adviser It s important to choose the right financial adviser for your situation. Do some research and shop around to find an adviser with whom you feel confident, and who ll take time to understand your financial position, concerns, questions and goals. Your financial adviser is required to give you some specific information about their services in a disclosure statement. Feel free to compare advisers disclosure statements and before you engage an adviser ask them to explain any parts you don t understand. Ask your adviser if they re a member of a dispute resolution scheme. 17

19 Where to find a financial adviser: find the names of AFAs in your area at (search for AFA list ) look up the contact details for any RFA or AFA and see the services they can provide in the official Financial Service Providers Register at view a list of QFEs at (search for QFE list ). QFE advisers don t have to be listed individually on the register, but the companies for which they work must be there find the names of advisers via their professional associations: - The Institute of Financial Advisers: - The Professional Advisers Association: - The Insurance Brokers Association of New Zealand: - SIFA: Free financial advice To help earthquake-affected Canterbury residents get the financial advice they need, the Commission for Financial Literacy and Retirement Income has set up a service in which qualified professional financial advisers provide free one-on-one advice. The consultations are run by local advisers who are giving their time and services at no charge. They are from a range of organisations and don t represent the Commission. The advisers are all AFAs, which means they re authorised by the FMA to provide certain services and advice on things like simple term deposits, insurance and home loans, as well as other investments and financial planning services. They won t sell you any products unless you agree, or charge for their initial advice. So there is no cost to you. How free financial advice could help you You don t have to have money to invest to benefit from financial advice. A qualified professional financial adviser can help you to understand your current financial situation, help you with your issues and identify all your options. They can give you information and tools to assist you with making the best financial decisions for your situation. Are you trying to come to grips with any of these questions and issues? Should I take my insurer s offer of a cash settlement for my rebuild? I m nearly 80 I don t want to wait three years for my house to be repaired. Should I just sell up, invest the money and rent? I ve been told my rebuild is at least a year away. What should I do with the EQC payments I ve received in the meantime? We have two home loans: one on our own home and one on a rental, but now we re down to one income and living in a munted house. Where do we go from here? If this is sounding all too familiar then you could benefit from a free one-on-one financial advice session with a qualified professional financial adviser. How to make an appointment for free financial advice For more information about the free financial advice service, visit the Sorted website at To make an appointment for your free consultation, phone: the CERA Earthquake Assistance Centre on 0800 RING CERA ( ) the Kaiapoi Earthquake Hub on

20 Unhappy with the advice or service you re receiving? How to make a complaint All financial service providers who work with retail clients must belong to an approved dispute resolution scheme. The dispute resolution service is free to you. Complaints about your insurer, bank, adviser or another financial service provider If you re unhappy with the service provided by your insurance company or adviser, bank or mortgage adviser, financial adviser, loan company, credit union or any other financial service provider, contact them first to see if they can resolve the issue. Free dispute resolution service If you re still not satisfied and can t resolve your dispute directly, contact their dispute resolution service provider, which will be one of the following organisations. You can check which service they or their company belongs to by looking on the official register at www. fspr.govt.nz or by calling any one of the four dispute resolution services listed below. Insurance & Savings Ombudsman: or Banking Ombudsman: or Financial Services Complaints Ltd: or Financial Dispute Resolution: or For a complaint about your bank or its services contact the Banking Ombudsman. The above websites have details of the dispute resolution process and what you need to do. Typical issues people have are denial of insurance claims, financial difficulty, incorrect advice, incorrect or excessive fees and charges, failure to follow instructions, delays in handling claims or requests and poor service. Complaints about financial advisers If you feel your financial adviser isn t behaving professionally or putting your interests first, you can also complain directly to the Financial Markets Authority ( or Complaints about EQC If you disagree with an EQC decision, phone 0800 DAMAGE ( ), or to lodge a complaint complaints@eqc.govt.nz. If EQC considers that the issue is best addressed by mediation, you ll be referred to the Mediation Service ( If you re unable to resolve your complaint with EQC, you can make a complaint to the Office of the Ombudsman ( 19