Check before you take out insurance

An insurance policy is a contract between you and an insurance company. It protects you against financial loss due to specific events such as property damage, redundancy, illness or death. In return for this protection, you pay money annually to the insurer (a premium). The aim of getting insurance is to put you back in the financial position you enjoyed before your loss occurred (indemnity policy).

There are many types of insurance cover but the main categories include house and contents, motor vehicle, life, health, travel and business. First, you need to decide what kind of policy is relevant to your situation. You can avoid potential problems when you make a claim in the future, by making sure that you understand your policy and what it covers.

Different insurance companies call their products different things with varying levels of protection and that cover different events, so it pays to shop around.

You can arrange insurance directly with an insurance company and get competitive prices. If you want help to identify your risks or to compare policies, then an insurance broker may be helpful. Businesses generally need advice from an insurance broker for commercial or business insurance, as they have more risks and need expert advice.

To understand common issues with different kinds of insurance, visit the Insurance and Financial Services Ombudsman's website(external link).

Checklist to minimise your risk

To minimise your risk before you buy any insurance:

• compare premiums, the excess that you will pay, and the level of cover that you need
• check any questions on the proposal that you are unsure about with your agent
• ask your agent what information you might need to disclose, eg past convictions or health conditions
• find out what any exclusions or special conditions mean
• ask about what happens when you lose your insurance cover
• ask who will be covered eg for vehicle insurance, is it just the owner or other drivers?
• check out the insurance company’s credit rating on the Reserve Bank of NZ’s website(external link)
• visit Sorted – Your Independent Money Guide(external link) for more information on insurance.

Know your rights

If you use the services of an insurance broker, check they are on the Financial Service Providers Register(external link) for financial advisers first.

Also look for a broker that is a member of the Insurance Brokers Association of New Zealand Ltd (IBANZ). It regulates its members to help protect you. You have extra protection if they breach their professional code of conduct.

See the Insurance Brokers Association of NZ's website(external link).

Insurers must treat you fairly and settle your claim fairly and efficiently.

The guarantees for services under the Consumer Guarantees Act apply to insurance services bought for domestic or household use. They cover any faulty advice from an insurance broker and the insurance companies themselves.

The guarantees are that services will be:

• provided with reasonable care and skill
• fit for the purpose intended
• completed within a reasonable time (if not agreed beforehand)
• reasonably priced (if not agreed beforehand).

Read Faulty or unsatisfactory services to find out more.

The Fair Trading Act prohibits insurance companies or brokers when they sell you insurance or give you advice from:

• making false or misleading statements
• behaving in a false or misleading way
• using unfair sales practices 
• including unfair contract terms.

Read False and misleading advertising or trading to find out more.

What you need to tell insurers (disclosure)

You need to be honest, and give complete, up-to-date and relevant information when:

• you apply for insurance (the proposal)
• you renew your policy
• you make a claim
• your circumstances change.

Before you make a claim, check the information that you have already provided. If it is incorrect or you left out information, the insurer may refuse your claim or even cancel your insurance from the starting date of the policy. However, they can only do this if the information is important (material) and would have affected their decision to insure or the level of premium charged.

Contact your insurance company first

If you have a complaint or dispute about your insurance policy or a claim, you should discuss this with the local manager or ask for the person responsible for handling complaints. The Insurance Council's Fair Insurance Code requires its members to acknowledge complaints promptly, investigate through a neutral person, and inform you of the decision within two months.

Read Resolve a problem to find out more.

Next steps

If you are unable to resolve your issue directly with the insurance provider, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

>  Resolve it: Banking, finance and insurance

Need more help?

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Common situations

Material facts

Janice takes out medical insurance and fails to disclose that she has high blood pressure. The insurance company refuses to pay out on her claim to cover medical expenses relating to a stroke two years later. Janice did not disclose a material fact that is relevant to her cover.

Poor insurance advice

Phillippa asks for insurance cover for her holiday rental property. The insurance broker does not advise her fully about all the options for landlord insurance, so she only takes out house and contents insurance. She is not covered for replacing some of the furniture after a tenant burgles the property. Phillippa complains to her broker who agrees to make an ex gratia payment to cover the loss.