How Insurance WOrks : Insurance types

  

House insurance

Insuring your home protects it against the risk of fire or other damage. Most house insurance provides cover only up to the ‘sum insured’ – a capped amount that is the limit of what you can claim. You need to decide what your sum insured is – how much it would take to rebuild your home in the event of a disaster. Learn more about insuring your home.

House insurance is usually required by your lender when you have a mortgage. Lenders Mortgage Insurance covers the bank if you can’t make the payments on your loan.

Contents insurance 

Contents insurance covers damage and loss of your belongings.

It also provides some ‘third party’ cover if you damage someone else’s belongings in the house you are living in. So it’s a good idea if you are flatting or renting..

Insuring your car

Your car may be the most expensive item you own. If it is stolen or damaged in an accident it can be very expensive to repair or replace. Motor vehicle insurance will pay to repair or replace your car if these events occur.

Comprehensive motor vehicle insurance is the most common and it covers you for loss, theft or damage to your vehicle. It also covers you for accidental damage to the other car or property you damage accidentally. 

It can be tempting to save money by not insuring a cheap car. This can be a mistake if you cause an accident. You will be responsible for paying for the other car’s damage.

Cheaper options are ‘third party’ and ‘third party fire and theft’ cover. Third party insurance covers for damage to another person’s vehicle or property, but not yours. Fire and theft cover this risk of your car being destroyed by fire or stolen.

The cost of insurance will vary depending on your age, your claims history, the level of excess you are prepared to take, and the make and type of vehicle.

Insuring your health

Your health is precious. If you fall sick and can’t work you will need money to pay the bills. Insurance can help you make ends meet if you are unable to earn your normal income.

There are many types of health-related policies such as:

·         Medical insurance, which covers private hospital and other medical bills.

·         Critical illness (also called trauma), which provides a lump sum if you suffer from certain illnesses such as cancer or heart disease.

·         Income protection insurance pays a percentage of your income on an on-going basis if you suffer from named illnesses.

·         Disability insurance, which pays out a lump sum for permanent disablement through sickness or accident.

·         Mortgage protection insurance to cover your mortgage if you can’t work.

Insuring your life

Life insurance provides a lump sum of money if you die. In some cases a portion or the entire ‘sum insured’ is paid out before you die if you are diagnosed with a terminal illness.

There are different types of life cover. The most common one is term life insurance, which covers you for a fixed number of years such as the length of your mortgage.

Whole of life insurance policies are more expensive, but (as their name suggests) cover you for the whole of your life until you die.

Find out more about insuring yourself.  

Read the fine print

All policies that cover your health or life have exclusions in the fine print. You may only be covered for certain named illnesses rather than blanket cover. It’s also very common for policies to have exclusions for ‘pre-existing conditions’, which means any illness you have experienced symptoms for before the cover started.

These types of insurance can be confusing. A broker can explain these insurances to you and help you lodge your claims.

Travel insurance

It is a good idea to buy travel insurance whenever you take an overseas holiday. Travel insurance policies cover your belongings against loss or theft, extra costs you may need to pay if your flights are cancelled, and medical treatment if you have an accident or become ill.

Medical bills can be very high in other countries and it is a big financial risk to go on holiday without travel insurance.

You can also buy domestic travel insurance to cover holidays in New Zealand. This covers you if your flights are delayed and for certain costs that can’t be recovered from ACC or your home contents insurer. Some policies have cover for rental car excesses.

Travel insurance policies usually have exclusions for pre-existing conditions, unattended baggage, and riots