Homeowners are being warned their insurance policies may not cover the full cost of rebuilding their homes in future if they're hit by a disaster.

The insurance industry is signalling a move to fixed-cover policies, with future cover likely to be based on Government valuations, Radio New Zealand reports.

Insurance Council chief executive Chris Ryan told Morning Report the changes could become common as policies come up for renewal in the next 12 to 24 months.

"Essentially people will be required to insure for a specific sum, similar to a car, when you have a fixed value of a motorcar you can ensure it for that.


"It's not due to a lack of availability of insurance, it's more reinsurers are asking for more clarity and specifics about what is being insured and how much it will be worth."

Fixed-cover policies were commonplace in New Zealand 20 years ago, however competition between companies led to full replacement policies becoming the status quo.

Mr Ryan said currently the "less wealthy pay more than what they probably should and the wealthy pay probably pay a little less than what they should" and limiting insurance cover could result in lower premiums for those with cheaper home.

However Consumer New Zealand's Sue Chetwin warned that it almost always costs more to replace a house than what it is worth, so homeowners would have to be careful what the fixed price is set to.

"If you've got a more highly-specced house or an old or unusual house that might mean you have to get a quantity surveyor in before you take out your insurance because you will be wanting to make sure the price that you fix it at is actually what you can replace it for," Ms Chetwin told Morning Report.

"So it might introduce a few complications into your decision making about insurance."