Understanding insurance policy terms

December 13, 2023

Navigating through New Zealand’s insurance policy terms and conditions can often be an overwhelming experience for many. In this guide, we’ll unravel some common complexities of insurance policy terms to ensure you have the knowledge and understanding to make informed decisions with clarity and confidence.


Understanding your insurance policy

Why it matters:

An insurance policy is not just a document; it's a legally binding contract between you and the insurer. It details your rights, responsibilities, and the specifics of the coverage provided. Understanding your policy is crucial, not only to ensure that you are adequately covered but also to know what is not included in your coverage.


Key policy terms

  • Premium: This is the amount you pay, periodically, to keep your insurance policy active. It's determined based on various factors, including the type of coverage, risk levels, and your personal circumstances.
  • Excess/deductible: The amount you need to pay out of your pocket when making a claim. Higher excess can lower your premium, but it's important to set an excess level that's manageable for you financially.
  • Sum insured / Policy limit: These terms refer to the maximum amount the insurer will pay in the event of a claim. It's pivotal to ensure that the sum insured / policy limit aligns with the value of what you're insuring.
  • Exclusions: Specific situations or circumstances that your policy does not cover. Understanding these is vital to avoid surprises during a claim.
  • Underwriting: This is the process insurers use to assess risk and determine whether they will provide coverage and at what cost. For life and health insurance, it involves evaluating various factors like your health, lifestyle, and financial history.
  • No-claims bonus: A discount on the premium, which increases each year that you don’t make a claim. It’s commonly used in vehicle insurance.
  • Total and permanent disability (TPD)insurance: This coverage provides a lump sum payment if you’re permanently disabled in a manner recognised by the policy and unable to work.
  • Trauma cover/critical illness insurance: Offers a lump sum payment if you’re diagnosed with a specific illness or condition listed in the policy.
  • Replacement value: In home and contents insurance, this refers to the cost of replacing or repairing your home and contents with new ones of the same kind and quality, without deducting for depreciation.
  • Underinsurance: This occurs when the sum insured is not enough to cover the full value of the insured item or property, potentially leading to reduced payouts.
  • Policy renewal: The process of extendingan insurance policy beyond its original term, usually on an annual basis.
  • Business interruption insurance: This helps cover the loss of income and additional expenses when a business is affected by an insured event.


Navigating the complexities

Understanding legal jargon: Insurance policies can be laden with legal terms. If you're new to insurance or find legal documents challenging, it’s beneficial to consult with an experienced adviser who can explain the terms in plain language.

Importance of full disclosure: Your duty of full disclosure requires you to be completely honest with the information you provide. Failure to disclose material facts could lead to a denied claim. Always ensure accuracy and completeness in the information you provide.

Regular reviews: Circumstances change, and so do insurance needs. Regularly review your policy to ensure it still fits your current situation, especially after significant life events like marriage, purchasing a house, or starting a business.

Read the fine print: Always take the time to read and understand the fine print of your policy. This includes the terms and conditions, exclusions, and limits of your coverage.

Ask questions:

If there’s anything you’re unsure about, don’t hesitate to ask. An informed decision is always better than one made in the dark. Insurance advisers can clarify any doubts and provide detailed explanations.


How NZBritannia can assist

As dedicated insurance advisers, NZBritannia are committed to helping you understand every aspect of your insurance policy. We can guide you through the policy wording, explain the implications of specific terms, and help tailor a policy that suits your unique needs.

Your understanding of insurance policy terms is key to ensuring peace of mind and the right protection. If you're considering a new policy or have questions about your existing coverage, don't hesitate to get in touch. Our experienced team of advisers are here to provide the expertise and support you need to navigate the world of insurance with ease and assurance.

Contact us on 0800 500 811 for a free no-obligation assessment, to ensure that your insurance truly protects what's important to you.


The information contained in this article is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.