Taking out insurance is an important decision in most people’s lives, but with so many details to consider, it can also be a confusing one.

Here are some of the most common ‘misconceptions’ that hold Kiwis back from protecting their financial future.

“Life insurance is just for breadwinners”

Contrary to what people often think, life insurance isn’t just for the working spouse in the household. In fact, depending on your circumstances, getting cover for the stay-at-home partner can be a good idea.

For example, stay-at-home parents may not earn an income, but that doesn’t mean they don’t contribute to the household in other all-important ways – including things like cleaning, childcare and meal preparation. How would your family cope if the non-working parent became seriously ill or were no longer around? Would the breadwinner need to take time off work, or hire someone to cover these tasks?

Getting cover against the loss of a homemaker can help ease the financial impact in an already stressful situation.

“I’m single with no dependants – I don’t need life insurance”

Even if you’re not in a relationship and don’t have kids, life insurance can help your family take care of outstanding costs and debts should something happen to you, including funeral costs. If you have a mortgage, for example, who would be responsible for it? If you’ve started a business, alone or with a partner, do you have a contingency plan in place?

Keep in mind that, besides life insurance, other types of cover may be even more appropriate for your circumstances, like income protection. If you stopped earning, income protection would provide the replacement income you need to cover your living costs and your mortgage repayments. Please get in touch to discuss this further.

“ACC will cover me – I don’t need health insurance”

In New Zealand, we’re lucky enough to have a public healthcare system, and ACC is a part of this. But ACC may only provide limited cover for accident-related treatment and rehabilitation. What if you need treatment for something that’s not accident-related? Or how would you cope financially if the actual treatment weren’t entirely covered by ACC?

Health insurance is designed to give you access to private medical treatments and diagnoses, without the need to wait in the public system. Depending on your needs, your policy may also cover GP visits and non-Pharmac funded medications, like life-extending cancer treatments that are not yet funded in New Zealand.

“I’m young and healthy – I don’t need insurance”

Thinking about the unexpected isn’t easy, and especially if you’re young, healthy and dependant-free, the worst-case scenarios may not be on your radar yet. But there can be good reasons to consider insurance at a young age:

• The unexpected can happen – while certain medical issues are less likely to be a concern when you’re young, unfortunately things like strokes, diabetes and bowel cancer are not limited to the elderly, so it’s important to have a plan for how these scenarios could affect you financially.
• You may have financial commitments to meet, like a mortgage or a student loan.
• Level of cover – by taking out insurance when you’re young and healthy, with little to no pre-existing conditions, any medical conditions that may arise later in life will be covered. As you get older, you could develop health problems that make insurance less affordable or even unavailable if it’s not already in place.

“I took out insurance years ago – I’m covered”

Personal insurance isn’t a ‘set and forget’ option. As your life changes, so may your insurance needs, and that’s why it’s important to regularly review your policy (ideally at least once a year).

Not sure where you’re at? Get in touch. Our SHARE insurance advisers can help you ensure that your cover is still aligned with your needs.

“Insurance always increase with age”

While this is generally true, stepped (age-related) premiums aren’t the only type of life insurance premiums you can choose from.

Level premiums don’t rise as you get older and remain steady throughout the duration of the contract. On the other hand, they are usually significantly higher than stepped premiums at the start of the policy, so choosing between one or the other depends on short and long-term affordability. Like to learn more about level premiums? Our SHARE insurance advisers are here to answer your questions.

“Getting cover online or through the bank is easier”

Securing insurance from your bank or online may seem like a convenient, hassle-free option, with fewer questions asked and shorter forms to complete. However, while online and bank-sold covers are usually cheaper, they may come with potential issues at claim time.

In insurance ‘jargon’, these policies are non- or partially-underwritten. This means they have a one-size-fits-all approach to insurance, or the application is assessed against high level criteria, without taking into consideration the ‘full picture’ about you. For example, they may have a blanket exclusion for pre-existing conditions. Plus, because your medical history isn’t usually assessed in detail, the risk of non-disclosure is higher, which could lead to a claim being denied down the track. 

On the other hand, a policy secured with the help of an insurance adviser is usually underwritten at application stage. Thanks to the underwriting process, with its extensive paperwork and detailed questions, the provider usually has enough information to tailor your policy to your unique profile.

“I have pre-existing medical conditions – insurance will be declined”

It may come as surprise to some, but pre-existing medical conditions aren’t always uncoverable, nor do they always result in higher insurance premiums.

Once again, going through the full underwriting process is key. Once you’ve answered all the questions in the application forms, and disclosed all medical issues you may have had in the past, the insurer may decide to add a ‘stand-down’ period for your conditions, cover them in full by increasing your premiums, or exclude them (either temporarily or permanently).

A quick note about full disclosure: it’s important to always let the insurer know about any medical conditions you’ve had, no matter how insignificant those might sound. Non-disclosure (no matter intentional or not) may result in a claim being denied down the track.

Get in touch

Our SHARE advisers are here to listen to your financial goals and help you put a plan in place to achieve them. Whether it’s mortgages, insurance, investments or KiwiSaver, we’re here to help.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.