Insurance fish-hooks—what to look out for when choosing a policy

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Posted 11 months ago by Pope & Co. Mortgages

Buying home and contents insurance online or through your bank can make things easy yet it may not result in the best outcome for the insured party. For this reason we urge people to take more time researching the differences between insurance companies and what their policies cover.

The number one thing when considering insurance cover is always to read the policy wording. This is where the rubber hits the road in terms of what your policy covers should you need to make a claim. Yes, glossy marketing brochures give an overview of the main product features; however, it’s the nitty-gritty detail in the policy wording which should demand every home-owner's critical attention, preferably prior to any claim being made.

While home and contents insurance may—and often does—seem comparable between a range of providers, the nature of what the policies actually cover can vary wildly across different suppliers. Unfortunately, at claim time, this can mean all the difference between the insured party receiving what they believe to be fair compensation for a loss incurred. If an owner suffers a further loss by not receiving what they believed they were due, simply by having neglected to read the policy wording, it can seem like adding insult to injury at what is already a very stressful time.

Why make it harder?

At Pope & Co. we believe in the power of self-education, which is why we provide a huge range of resources for all customers as part of our comprehensive service. Some of the fish-hooks to watch out for when taking out home and contents cover can include the following pitfalls:

  • For landlords—the insurance company you insure your own home with may not be the best one to insure your rental property with. There are many reasons why, and again—it all comes down to the policy wording. Consider carefully what you are covering, for example, does the rental have retaining walls? What is the height of these? Different companies cover different height maximums for retaining walls.

 

  • Multi-product discounts generally do not help customers. Multi-product discounting (i.e. bundling various products with the same company) make customers price-focused, which in the end usually benefit the insurance company more than the customer. The real value of insurance is knowing what sort of cover you need and finding a policy with a robust policy wording to match.

 

  • Another question to ask regarding multi-product discounts is—discounted from what? Again, the best response to price-discounting is to read the policy wording from different companies and work out what you need for your property.

 

  • Traditionally Kiwis have had a great DIY-approach to home ownership, but in matters of insurance cover sometimes a DIY approach can carry a hidden cost. Furthermore, between the demands of modern-day living it's tempting to gloss over wordy, boring-looking documents and not read things thoroughly. However, ensuring your level of cover is adequate for what is usually your biggest investment is critical and deserves your attention. If reading policy documents doesn’t excite you, use a highlighter and take notes to compare different cover.

 

  • Fly-buys and airpoints are like multi-discounts and often carry little value. They are a hook for suppliers and can shift customer focus to bargain shopping and seeking “extras for free”. Again, be careful that some of those “extras for free” don’t come at a hidden cost. Read the policy wordings, putting price to one side, and you might see why not all insurance cover is equal. You never know—by being thorough upfront, you may be pleasantly surprised and find you could have paid for cover which you don’t actually need. It pays to read the fine print!

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