These are biggest insurance mistakes New Zealanders make

These are biggest insurance mistakes New Zealanders make | Insurance Business New Zealand

These are biggest insurance mistakes New Zealanders make

For many Kiwis, getting the right insurance coverage plays an important role in reducing financial uncertainty and making accidental losses manageable.

As the Insurance Council of New Zealand (ICNZ) puts it: “Having insurance is an important part of being resilient. It puts you back on your feet when the unexpected happens, so you can get on with your life.”

But insurance can be a complicated matter, especially for the average policyholder who is not trained to sift through the jargon – and because of this, some end up committing preventable errors that often make all the difference in the event of a claim.

Here are some of the biggest insurance mistakes New Zealand policyholders make, and ways on how these can be avoided, according to industry experts.

1. Putting off buying insurance

A person’s age is one of the primary determining factors when it comes to how much coverage they can get and the premiums they need to pay – and often the longer they delay purchasing insurance, the harder the process gets and the costlier policies become.

“One of the biggest mistakes that people make is putting off buying insurance for another day,” warned Mortgage Express, a group of mortgage and insurance advisers based across New Zealand. “Sometimes it just feels too hard to make a decision about which type of insurance you need, or you may feel lost in all of the jargon that often goes hand-in-hand with insurance paperwork.”

The firm advised clients to take out insurance as soon as possible because “the longer you leave buying insurance, the harder – and usually more expensive – it gets. It could even mean not being able to get insurance when you do decide you need it.”

2. Not getting enough insurance

Mortgage Express added that getting a policy lacking in coverage defeats the purpose of taking out insurance, describing being underinsured as “almost as bad as not having insurance at all.”

“Finding the right amount of cover can make all the difference when it comes to your family’s financial assurance, so it’s worthwhile discussing your needs with your insurance adviser, who can help you find that sweet spot between too much cover and too little cover,” the firm said.

Read more: Broker reveals the two biggest areas of underinsurance

3. Not disclosing all necessary information

The information an applicant provides allows insurance companies to come up with a policy tailored to their needs and situation. Not disclosing relevant information, whether done inadvertently or intentionally, can impact a policyholder’s ability to make a claim. 

“You might think that something isn’t really important, or not relevant, to your insurer – but withholding information or telling even a small untruth on your application or claim can have a big impact on your financial life,” said Financial Advice New Zealand, a professional membership organisation for financial advisers.

The group advised insurance applicants to “carefully think through the detail when completing insurance forms, check out information you’re not sure of, and… always talk to a financial adviser or insurance expert” if they have clarifications.

4. Not understanding and reviewing their policies

Not fully understanding the fine print is another mistake that can prove costly to policyholders.

“Reading policy documents can feel tedious, but you’re choosing to take out cover for a reason, so it makes sense to know the details,” said Financial Adviser NZ. “And if navigating the ‘inclusions’ and ‘exclusions’ creates confusion, you can always have a chat with [an expert].”

Read more: What does being a lawyer and being an insurance broker have in common?

Mortgage Express, meanwhile, stressed the importance of reviewing insurance policies, especially when a policyholder’s circumstances change.

“Adopting a set and forget attitude could leave you short when you need to claim or mean you’re paying too much for your insurance needs,” the firm said. “At key stages of your life – when you get married, have children, take on significant debt like a new home – it’s important you review your insurance policy to ensure you have the right amount of insurance cover for that stage of your life.”

5. Focusing solely on price

While it may be tempting to go for the cheapest policy, Financial Adviser NZ said this move could backfire, especially if the policy does not provide the cover that is needed.

“There are significant variations between the benefits of personal insurance policies in the market and what is cheap may be less likely to pay out – or pay out less often,” the group explained.

Read more: IAG encourages homeowners to check sum insured

6. Missing insurance repayments

The experts also emphasised the importance of keeping up with premium payments.

“If you fail to pay for a certain amount of time, your insurance policy could lapse and leave you uncovered and unable to make a claim,” they said.

7. Purchasing insurance without expert advice

According to Mortgage Express, many of these costly mistakes can be avoided if the insurance applicant would consult experts before taking out a policy.

“Not only can an insurance adviser help you find the right cover so you’re not paying too much or being left without enough cover, [they] can also review your insurance each year and help you make changes to your policy as your life situation changes,” the group said.