The Insurance and Financial Services Ombudsman keeps a record of cases it has resolved involving consumer complaints against insurance providers. And while we can’t guarantee that you’ll never encounter any problems with an insurer, being prepared and understanding your level of cover is the best defence.
What is an insurance premium?
“An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, life and others.”
It’s easy to see why looking for an insurance policy with a lower premium can feel like the way to go. But sometimes the old adage “you get what you pay for” rings true. Here are five questions to ask yourself before signing on the dotted line for any insurance policy, regardless of its cost.
1. Have you factored in any pre-existing conditions?
Switching companies for health-related insurance is something that requires careful consideration. That’s because you may no longer be covered for pre-existing conditions. A pre-existing condition is anything you have symptoms of, even if the illness hasn’t been diagnosed. If you’ve switched insurers in the meantime, you may not be covered for a serious illness, such as multiple sclerosis, cancer or heart disease, that your previous insurer would have covered.
As well as health insurance, other insurance policies this can apply to include: mortgage or income protection, disability insurance, trauma/critical illness, pet and life insurance. Sometimes, it’s best to suck it up and pay the premium. If you want to save money, check to see if your existing company is prepared to offer you a better deal in order to keep your business.
2. Does your policy include third-party liability?
Generally, third-party insurance is a major consideration for motorists, as it covers an at-fault driver for the cost of damages to others’ property in a crash. However, it should also be an important part of your choice of home and contents insurance, as it can cover you for personal liability if you accidentally damage someone else’s property. Not all policies include this cover, so make sure you opt for one that does.
3. How simple is the insurance claims process?
This is something we consider at Canstar when compiling our insurance ratings reports, and it makes sense to factor it in when making your decision. After all, if you do have to make a claim, the last thing you will want is a delay due to a bureaucratic nightmare.
4. Are you aware of the insurance company’s credit rating?
Do you know what your insurer’s credit rating is? Unlike a school result, a B signifies weaker financial security characteristics, rather than a half-decent mark.
At Canstar, we really mean it when we recommend that you read your insurance policy product disclosure statement thoroughly. It can highlight any deficiencies in cover that could result in a claim being turned down.
5. Is budget cover really that risky?
With home and contents insurance, most companies offer a good level of cover in their most popular policies but also have cheaper budget policies. These policies are not created equally and could mean the difference between having a parachute when you need it most and finding yourself in freefall.
In the case of home insurance, policies with names such as Premier, Echelon or even Standard will reinstate your home to the sum insured. Sum insured is the estimated cost of rebuilding your property and is the maximum amount the insurer will spend if the house needs to be repaired or rebuilt. On the other hand, budget policies will only pay out the market value.
In the case of contents, most policies cover you for accidental loss or damage anywhere in New Zealand. A budget contents policy is kinder on the wallet, but it may only cover you for specified risks, such as fire and theft. In addition, cheaper policies may not cover your belongings if something happens to them outside of your home, and the insurer may only pay the current market value, rather than providing a replacement. Make sure that you understand exactly what you’re paying for when you take out an insurance policy based on the premium alone.
If you own a lot of valuables, such as jewellery or camera equipment, then it pays to shop around. Most home and contents insurance will have limits on cover for individual items unless specified, as well as the total amount of jewellery for which you can claim. Other insurers won’t cover you if you take off the jewellery and don’t lock it away.
Still not sure which insurance provider to go with? Check out Canstar’s customer satisfaction ratings for the following insurance categories: health insurance, home and contents insurance, pet insurance and travel insurance.