Buying cheap insurance is often one of the biggest mistakes when looking to arrange an insurance plan for yourself. While the idea of saving money can be tempting, simply shopping around based on price has historically not gone well for a lot of people down this path.
With insurance, you often get what you pay for
Insurance can be a great thing, but it can also be highly problematic. You can spend years paying insurance premiums, but when you claim may only be when you have a major illness, or when you die – and in that case your entitled survivors such as your family make the claim. In those unthinkable moments, comes the moment of truth as to how your insurance policy actually performs.
If insurance is very cheap, there might be a risk it might be that you are foregoing valuable cover.
If you have lousy insurance, you might spend years paying for insurance that never pays out
As picked up by a variety of TV shows, a lot of people who have substandard insurance policies might find themselves in a position where they spend years paying for an insurance that never pays out. It isn’t unheard of for people to be declined a claim, even if they died. Reasons might be that the policy wording and terms and conditions might exclude certain events.
For example, if a person’s weight was well above the average (e.g. a very high BMI), this might mean they could never get a payout, even if they had been paying for years. Or if their death was caused by a health issue they had before them signing up for the policy, even if they didn’t have to disclose it in order to apply for the insurance, they could be turned down on the basis it was a pre-existing condition.
Focus on quality, not price
With insurance it is important to understand the quality of the insurance policy and the insurer you will be dealing with. Don’t just consider the insurer’s financial strength rating. It helps to understand their policy wording, and what they pay out for, and what they don’t pay out for.
The policy wording and terms and conditions of the policy can give an indication as to what the insurer will pay for and will not pay for. Ideally it is more beneficial to have a policy that you can claim on more easily, this would minimise the likelihood of coming to find your issue is not severe enough to claim on for example.
Also bare in mind that different companies have different mindsets for claims payments. Some companies have a greater mindset of wanting to find ways to approve claims.
There are also other factors that cannot be considered in this short article.
If your budget is an issue, consider other angles of dealing with this
If you have a limited budget, consider other angles of dealing with this. For example, if you are insured for $500,000 and finding this very expensive, it might be worth reducing this to a slightly lower amount if you are more comfortable with that. It might mean being covered for a bit less dollar-wise, but this could be better than switching to a problematic insurance provider.
Get professional advice
For many reasons, people agree that it is better to get professional advice around insurance to ensure it is done correctly. You can speak to us and a professional and qualified insurance adviser can assist you. There is no additional upfront cost generally for having an insurance adviser make some recommendations in a lot of cases.
The adviser you will work with can also present you different prices and options from different major insurers in New Zealand.