An online quiz conducted by the Insurance Council of New Zealand (ICNZ) found that close to 20% of respondents did not understand key insurance terms.
The quiz, which was part of ICNZ’s celebration of Money Week 2021, was answered by 700 people for the chance to win a $200 prize. It found than only 54% of respondents fully understood what their insurance covers them for.
The quiz asked questions on the three most commonly misunderstood parts of insurance: sum insured, excesses and the difference between sudden and gradual damage. It found that 17.7% of respondents did not understand that a policy’s sum insured should be set at what it would cost to rebuild. This meant that they may not have enough cover if they suffered a total loss. Meanwhile, 18.2% of respondents did not understand the difference between sudden and gradual damage.
“With your house often the biggest asset you own, it pays to regularly check if you have the right level of cover and use the calculators available online to understand what it would cost to rebuild your home,” ICNZ said.
The industry body has produced a range of consumer guides to help explain the often-misunderstood areas of insurance, such as calculating a house’s sum insured, excesses and gradual damage and resultant damage. Insurance agents and brokers can refer to these to help customers better understand their insurance policies.