What is insurance?
An insurance policy is a contract between you and an insurance company. It protects you against financial loss due to specific events, eg property damage, redundancy, illness.
It's designed to put you back in the financial position you were before your loss. This is called indemnity.
There are many types of insurance cover, but the main are:
- motor vehicle
Decide what kind of policy is relevant to your situation.
Different insurance companies call their products different things. They may have varying levels of protection and cover different events, so it pays to shop around.
Using a broker may be helpful to:
- help identify risks
- compare policies and prices.
This may be useful if you're in business or need expert advice. You can also arrange insurance directly with insurer.
Avoid problems when you make a claim in the future by understanding what your policy covers.
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
- you renew your policy
- you make a claim
- your circumstances change.
Make sure you:
- answer all of the questions on the insurance application, even if you don’t think they are relevant
- contact your insurer if you forgot to include something on the application
- read through your application carefully before signing it if someone else fills it in
- tell the insurer about any events, eg convictions, speeding tickets, accidents, losses that have happened since you the last renewal, each time you renew your policy
- ask your doctor for a copy of your medical notes if you can’t remember your full medical history.
Before you make a claim, check the information 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. 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.
Claim denied or not given full amount
Your insurer may decline a claim, or pay less than you expected if:
- the loss or damage isn't covered in your policy
- it wasn't sudden or accidental
- you can't provide proof of your loss or damage
- you haven't paid your premiums
- you didn't tell your insurer something they need
Think creatively about proof. If you don't have a receipt, you may have other evidence, eg photos, bank statements, documents relating to repairs, emails about a Trade Me transaction.
If you aren't happy with the outcome of a claim, complain to your insurer. Another assessor must look at your claim to see if there was a good reason not to accept it, or pay more.
You aren't happy with the standard of repairs
If your insurance company organises a repair, and you aren't happy with the work, ask your insurer to sort it out. It is their responsibility. They must coordinate with the tradesperson, or repairer, to make sure the work is to a professional standard.
Don't ask someone else to put the work right, before you've talked to your insurer. They may not cover your costs.
Not telling your insurer something relevant – called disclosure
You must tell your insurer about anything which affects your insurance — when you first take out your policy, each time it renews, and if something changes in-between.
Examples of something which might affect your insurance could include:
- you work from home
- you're putting items in storage
- you're doing renovations
- the main driver of your car changes
- you have a medical condition
- you, or someone you live with, have a criminal record
- you're charged for drink driving or speeding.
If you don't tell your insurer about something, and it is relevant to your claim, they may refuse to pay. For example, if you cause a house fire while welding, and hadn't told your insurer you were running a welding-business from your garage, then your insurer might decline the claim.
Ask your insurer for your latest policy document to find out what it covers.
Replacement value versus what it's worth
Insurance is designed to put you back to where you were, before what you are claiming for happened.
This can mean you get less in an insurance claim than you paid originally, or what it would cost to replace.
Check if your car, house or contents policy covers you for:
Market value: what you might get for the item if you sold it today. In the case of cars, this is generally less. For a painting or antique, it might be more.
Replacement value: how much it would cost you to buy at the time of your claim.
Agreed value/sum insured: the maximum amount you and your insurer agreed you would get for loss or damage.
Indemnity value: the value of the item at the time of the loss. This is designed to put you in the same financial position you were in immediately before the loss.
Not realising you must pay some of the cost — the excess
When you make an insurance claim, it is normal for you to pay some of the cost to put things right. This is called an excess. When you take out your insurance policy, you agree on the excess.
Generally, the higher the excess, the lower the premium you have to pay. If the cost of putting something right is less than your excess, it may not be worth making a claim.
For example, if you have a $200 excess, and the cost of repairing your dented car is $200, your insurer will not pay anything to help fix the damage. If fixing the dent costs $700, your insurer might pay $500 towards the repairs.
Check your policy to find out your excess. Make sure you're looking at an up-to-date version. Ask your insurer to send you a copy if you can't find it.
Paying more than one excess
Some policies say one event means one excess. Others say you must pay a different excess for each policy. Check your policy documents to see what it says. If you aren't sure, ask your insurer.
If somebody breaks your car window and steals your bag, you may be covered by two different policies — and so have two excess payments.
||Handbag, phone, glasses
||Car keys, broken window
Different events usually mean more than one excess — no matter how seemingly connected.
For example, your belongings are damaged in a flood and you drop your phone, inspecting the damage.
Costs aren't covered due to gradual damage
Insurance covers you for sudden, unexpected events. If something breaks because it's old, you're unlikely to get anything to replace it. If it is damaged unexpectedly, or by breaking it damages something else, you may have a claim.
Your old car breaks down = unlikely claim.
Your old car is in an accident = may have a claim.
Your old car's faulty handbrake causes it to roll into your garage door = may have a claim.
Cash versus repairs
It is up to the insurer to assess how to address your claim. If it is possible to repair the damage, they may do this instead of paying you to replace the item.