The government plans to cover an extra $50,000 of building damage for each claim after a natural disaster, bringing its cap to $150,000.
The EQC, which has been under review, automatically covers all homes that are privately insured for fire damage.
The minister responsible, Gerry Brownlee, said the changes would simplify the scheme and help resolve claims faster.
Insurance lawyer and Labour candidate for Christchurch Central, Duncan Webb, said EQC's repair programme and claim management for the 2011 Christchurch earthquake had been a disaster - and change was needed.
"Having the insurer as a single point of entry and as the claims manager, that's a great idea.
"Lifting the cap to $150,000, that's a good idea too because we do want to have really good effective coverage."
The overhaul is expected to come into effect in 2020 and would not affect existing claims.
Prime Minister Bill English said the overhaul would also remove EQC's cover for household insurance.
"There's a good private market in contents insurance, and so people can go elsewhere to entities that are better at it.
"EQC have to be an expert on landslides and earthquakes, which is not the same as worrying about whether the tea set your mother-in-law got you got broken."
Mr English said the changes would simplify the process for homeowners and insurers.