What’s insurance, anyway?

Life is all about risk. Every day you evaluate the risks in your life – deciding which are worth taking and which are best avoided.

Insurance is a way of transferring to someone else the cost of risks you cannot avoid but do not want to necessarily take on yourself.

People generally understand house, contents and vehicle insurance more readily than they do personal cover. Those policies protect something tangible if something bad were to happen to it.

Personal cover is the same principle, but it covers something even more important: You.

Policies that protect ‘you’ rather than ‘things’

Life insurance pays out a lump sum to your estate, or to the owner of your policy, if you were to die. This can help your family financially cope with the future without the income stream and support they were expecting you to provide for years to come.

Income protection or mortgage protection pays out a set amount each month if you were not able to work due to illness. It can also top up the amount you’re paid by ACC in some cases of an accident.

Trauma policies pay out a lump sum if you suffer a specified type of serious health condition or injury.

Health insurance helps to defray the cost of seeking medical and other health treatments and usually means you can have your medical needs met without a lengthy public waiting list.

These policies are often necessarily complex because they deal with complex medical conditions and significant sums of money.

But they can make the difference between suffering serious financial hardship and life carrying on as much as normal despite a major event – at least with regards to your bank account.

How insurance advisers help and what to expect

A financial adviser can help you to unpick what you actually need and which policies are best for your circumstances. When it comes to personal insurances, one size does not fit all.

You can expect your insurance adviser to talk to you about things like:

• What’s important to you? What are your goals for the future, what are you saving for and what would you want to leave for your family if you were not around? Would you want to be able to leave your family totally debt free or would you be happy to just reduce the debt a bit?
• What debt and other obligations do you have? Who would struggle if you were not earning an income? What might you not be able to pay for?
• How could you cope if you were off work for a period of time? Do you have a financial buffer to call on or would you be in trouble – also, how quickly would things get tricky? If you can afford to deal with a longer stand-down period before payouts begin, it makes income protection policies cheaper.
• What are your plans for the future? Do you expect to grow your family?
• What’s your work situation? Are you self-employed – and do you need cover for your business – or are you an employee? How much do you earn?
• What budget do you have? If you can’t afford all the types of protections that could help you, what do you hold as most important? This is one of the most important steps in assessing your insurance priorities, and really is all about you being clear about your risks and what you choose to commit to.
• Do you have any insurance in place already? Are you happy with how that’s performing?
• Have you had any claims in the past?
• What health conditions do you already have? It’s vital that these are disclosed at application time to ensure that you are covered in the way you expect to be.  Sometimes even symptoms can be treated as a sign of something you should have revealed.

Getting the detail right for you

Insurance can be hard to navigate if you’re not an expert. Your insurance adviser will make it much simpler and straightforward, removing all the worry about whether you and your family are adequately protected from risk.

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Please note that the content provided in this article is intended as an overview and as general information only. Please use your discretion and seek advice before making any decisions based on the information provided in this article.