Myth 1: Insurance companies always look for ways to decline a claim rather than pay a claim

In fact, more than 90% of all claims are paid. The vast majority that are not, are claims that have been withdrawn because they’re for less than the policy excess, outside the scope of the policy or people not wanting to lose their no claims bonus.

Myth 2: My insurance will cover me for everything including wear and tear

Insurance is there to support you for sudden and accidental events. It doesn’t cover gradual damage that can be prevented by carrying out regular maintenance. For example – if a washer or pipe on your washing machine perishes, your insurance won’t cover you to repair the part but will cover you for any damage caused from it leaking.

Myth 3: There is no point in complaining because nothing will happen

Insurers are bound by the Fair Insurance Code to treat their customers honestly and fairly.

Many bad complaint experiences are the result of a lack of knowledge of what is and isn’t covered. However, if a claim is in accordance with the contract and policy it will be paid.

If you feel that you have not been treated fairly, there are two independent dispute scheme to help you, Financial Services Complaints Limited or the Insurance and Financial Services Ombudsman. Their services are free and binding on the insurer.

Myth 4: Insurance covers everything that goes wrong

Insurance is there to support you with the unexpected. It covers certain events and has exclusions. Unfortunately, if it covered all situations all of the time it would be too expensive due to the scale of the risk the insurer would be taking on.

Myth 5: I don’t have to pay an excess if I’m not at fault

Normally an insurer will deduct the excess unless you can provide the name of the other party and they have admitted fault.  Excess is your share of the risk and keeps insurance affordable.

Myth 6: I’m renting and the value of my goods aren’t worth insuring

Content insurance covers you for more than loss to your property and possessions, but also covers you for accommodation costs if your property is uninhabitable and your liability if you have a mishap such as damaging another persons property. You’ll be surprised by the list of incidents that you’ll be covered for. If your actions on your bike causes an accident, if you lose control of a supermarket trolley, or if your BBQ sets fire to the neighbour’s fence, then your contents insurance comes into effect.

Myth 7: I don’t need to review my sum insured. The insurer just wants more money

Insurance isn’t a set and forget product. You need to review your policy and update your insurer with changes – such disclosing any changes or enhancements to our property, or any new valuables you may purchase or be given. This ensures you have the right amount of insurance in place should you need to claim.

Myth 8: Everyone stretches the truth with insurance claims

You might be surprised to know that around 5% of insurance claims have a fraudulent element – such as exaggerating value to get back what someone perceives to be owed. However, fraud is by no means a victimless crime. It is a major cost for insurance companies, a cost that is passed on to all of us in our premiums.

The long-term consequences of committing insurance fraud can be far-reaching. You may be prosecuted and it could make getting insurance very difficult in later years.

Myth 9: My car isn’t worth much so there is no point taking out insurance

If you cause damage to another car you are liable for those costs

Myth 10: My insurer can just cancel my insurance if I accidentally forget to tell them something when I take out a policy.

Under the Fair Insurance Code ICNZ members are expected to respond reasonably to information that wasn’t disclosed at the point of taking out an insuance policy. However, if it was a serious non-disclosure, such as having a prevoius convisciton for arson and then making a claim for a house fire, the insurer can decline the claim or even void the policy, meaning they treat the policy as though it never existed.

As published on NZ Herald 25 January 2020 – Insurance: Are you covered? The 10 biggest insurance myths busted