Common Beliefs about insurance

11th February 2015
  • I never claim so why do I need cover? If you never claim then you are one of the lucky ones. Insurance is effectively a group of people who each pay a little to provide for the unlucky few who may suffer a large loss.
  • I like having Doctor’s cover in my medical so that I can claim back all my premiums each year? How sustainable do you think this modus operandi is? Why do you require insurance for something you can afford? This merely becomes a dollar swapping exercise between you and the insurer. The cost in administration will be taken into account when premiums are reviewed!
  • Insurance companies don’t want to pay claims – This is simply not true.  Unfortunately the cases we all hear about on TV are often cases where claimants may have not fully disclosed all information about their health or circumstances initially, or they may have believed they were covered for something they weren’t.  It is extremely important to ensure you read your policy documents. Your Adviser will familiarise you with the terms of your policy.
  • It’s too expensive – Compare the cost of the premiums to the cost of replacing the assets you should cover.  It is important to prioritise your insurance needs and use larger excesses where possible to keep the costs down but DON’T risk a lot for a little and use those emergency funds to self-insure as much of the smaller risks as possible.
  • Why should I cover my income when I pay ACC levies? ACC only covers you for accidents and not illnesses.  You are more likely to suffer an illness which will interrupt your ability to work, than you are to have an accident.
  • I have house cover and that’s all I need – You don’t question insuring your house which is potentially a lot less valuable than your income.  See the example:Let’s say the average house is worth $500,000.00.  Now, you are 30 years old and earn an income of $70,000.00 p.a. and you think you will retire at age 65.  Without any adjustments for inflation your income is potentially worth $2.1 million until you retire.