Five Insurance Mistakes Kiwis Make That Can Cause Problems at Claim Time
Having insurance is only part of being properly protected. Understanding your policy, keeping it up to date and providing accurate information can all matter when you eventually need to make a claim.
One of the best times to understand your insurance is before you need to claim. Accurate disclosure, appropriate cover, understanding policy terms and keeping your protection aligned with your circumstances can all help reduce surprises later.
Insurance Should Work When You Need It Most
Most people arrange insurance hoping they will never need to use it. But if illness, injury or another insured event does occur, that is when the details of the policy become especially important.
Problems do not always come from having no insurance at all. Sometimes they come from misunderstanding the cover you already have, allowing it to become outdated or making assumptions about what a policy will do.
Here are five common mistakes worth avoiding.
Not Answering Application Questions Fully and Accurately
When you apply for insurance, the insurer asks questions about areas such as your health, medical history, occupation, lifestyle and other information relevant to underwriting.
These answers help the insurer decide whether to offer cover and, if so, on what terms.
Leaving out relevant information or providing inaccurate answers can create problems later if the insurer discovers that the information provided at application was incomplete or incorrect.
Arranging Insurance Once and Never Reviewing It
Insurance needs can change considerably over time.
You may have arranged cover when you were single, renting and earning a different income. Years later, you may have a partner, children, a larger mortgage or very different financial responsibilities.
The policy may still be valid, but the amount and structure of cover may no longer reflect your current life.
Assuming All Insurance Policies Are Basically the Same
Two policies can appear similar on the surface while having meaningful differences in definitions, exclusions, optional benefits, claim criteria and how benefits are structured.
The lowest premium therefore does not automatically mean the most suitable policy for your circumstances.
This is particularly important with covers such as Trauma, Income Protection and Total and Permanent Disability, where definitions can play an important role in determining whether a claim meets the policy requirements.
Not Understanding Waiting Periods, Benefit Periods or Exclusions
Insurance policies often include conditions that affect when and how benefits can be paid.
For example, an Income Protection or Mortgage Protection policy may include a waiting period before benefits begin and a benefit period that limits how long payments can continue.
Policies may also include exclusions, special terms or other limitations that are important to understand before a claim occurs.
Cancelling or Replacing Existing Cover Too Quickly
Circumstances change, and there may be valid reasons to alter or replace insurance. But existing cover can have value that is easy to overlook.
A new application may involve fresh underwriting. Your health, occupation or circumstances may also have changed since the original policy was arranged, which could affect the terms available under new cover.
This is why existing insurance should generally be reviewed carefully before making changes.
What Should You Do If You Need to Make a Claim?
If you experience an event that may be covered by your insurance, contact your adviser or insurer as soon as reasonably practical.
The information required will depend on the type of claim and policy. This may include claim forms, medical information, financial evidence or other supporting documentation.
You don't necessarily have to navigate the process alone. Your financial adviser can help you understand the claims process, identify what information may be required and communicate with the insurer as appropriate.
Five Questions to Ask About Your Insurance Today
You do not need to wait until claim time to discover how your insurance works.
Can you answer these five questions?
- What insurance policies do I currently have?
- How much cover do I have under each policy?
- What are the important exclusions or special terms?
- Does my cover still reflect my current financial responsibilities?
- Who would I contact if I needed to make a claim?
If you cannot answer some of these questions, that does not necessarily mean your insurance is wrong. It may simply be a good reason to review and understand what you already have.
A Review Doesn't Automatically Mean Buying More Insurance
One misconception about insurance reviews is that the goal is always to increase cover or change insurers.
It shouldn't be.
A useful review should first help you understand your current protection, identify whether anything has changed and consider whether your existing arrangements still suit your needs and budget.
Sometimes the right outcome is to make a change. Sometimes it is to keep exactly what you already have. The important part is making that decision with a clear understanding of your cover.
When did you last properly review your insurance?
A complimentary insurance review can help you understand your existing cover, important policy features and whether your protection still reflects your current circumstances, responsibilities and budget.
Book a Complimentary ReviewThis article provides general information only and is not personalised financial advice. Insurance benefits, definitions, exclusions, underwriting requirements and claim criteria vary between insurers and policies. Claims are assessed by the relevant insurer against the terms of the individual policy.