(1) Subject to any regulations made under this Act and to Schedule 3, where a person enters into a contract of fire insurance with an insurance company in respect of any residential building situated in New Zealand, the residential building shall, while that contract is in force, be deemed to be insured under this Act against natural disaster damage for its replacement value to the amount (exclusive of goods and services tax) which is the least of—
(a) if the contract of fire insurance specifies a replacement sum insured for which the building is insured against fire under that contract, the amount of that sum insured:
(b) if the contract of fire insurance does not specify such a replacement sum insured but does specify an amount to which the building is to be insured under this Act, that amount:
(c) the amount arrived at by multiplying the number of dwellings in the building (being the number determined in accordance with subsection (3)) by $100,000 or such higher amount as may be fixed from time to time for the purposes of this paragraph by regulations made under this Act.
(2) An amount specified for the purposes of subsection (1)(b) shall not be less than the amount calculated by multiplying a sum of not less than $1,000, or such higher sum as is fixed from time to time for the purposes of this subsection by regulations made under this Act, by the area in square metres of the residential building. Where a contract specifies a lesser amount, the amount specified is deemed to be $1,000 or such higher sum as is fixed from time to time for the purposes of this subsection by regulations made under this Act, by the area in square metres of the residential building.
(3) For the purposes of subsection (1)(c), a residential building is deemed to comprise 1 dwelling unless the existence of a higher number of dwellings in the building is disclosed to the insurance company at the time that the contract of fire insurance is entered into.