Insurance: Are you covered? The 10 biggest insurance myths busted

Travelers to Australia still need to get insurance. Photo / File.

There are a lot of urban myths when it comes to insurance. Here are some of the most common theories people have according to the Insurance Council of New Zealand and how they stack up compared to the facts.

Insurance companies always look for ways to decline a claim rather than pay a claim
In fact, more than 90 per cent 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 The vast majority that are not, are claims that have been withdrawn because they're for less than the policy excess, outside the scope of the policy or people not wanting to lose their no claims bonus.

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.

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 schemes to help you, Financial Services Complaints Limited or the Insurance and Financial Services Ombudsman. Their services are free and binding on the insurer.

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.

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.

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.

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 as disclosing any changes or enhancements to the 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.

Everyone stretches the truth with insurance claims.
You might be surprised to know that around 10 per cent 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.

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, so it pays to have insurance even if you only take out third party cover for you car.

I'm travelling to Oz so I don't need travel insurance
It doesn't matter how far you travel, it always pays to have travel insurance. Surprisingly, one in five travellers don't take out travel insurance and almost half of travellers think insurance only starts once they start travelling. However, travel insurance will offer cover for events that may impact your trip before you leave.

Insurance - are you covered?:
Monday: What you need and what you don't
Tuesday: House, contents and car insurance
Wednesday: Health insurance
Thursday: Life and income protection insurance
Friday: Travel insurance
Saturday: All your insurance questions answered plus the best tips and advice from the experts