2.1: Frequently asked questions about Personal. - Text of this Insurance Council publication. 2.3: Introduction to Personal Insurance.

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1 NZQA Insurance Unit Standard Element 2: Describe Personal Insurance by Types of Cover Customhouse Quay, P O Box 474 Wellington, New Zealand Telephone: Facsimile: Internet icnz@icnz.org.nz INSURANCE COUNCIL OF NEW ZEALAND INC Insurance Council Resource Kit Includes: 2.1: Frequently asked questions about Personal Insurance. 2.2: A Guide to Personal Insurance - Text of this Insurance Council publication. 2.3: Introduction to Personal Insurance. 2.4: Frequently asked questions about Contents Insurance. 2.5: Introduction to Motor Insurance. 2.6: Things to consider when insuring your vehicle. 2.7: Frequently asked questions about Motor Vehicle Insurance. 2.8: A Guide to Motor Vehicle Insurance. - Text of this Insurance Council publication

2 2 Personal Insurance - Frequently Asked Questions RESOURCE 2.1 Q. What is a policy? A policy is the contract between you and your insurance company that sets out the conditions and details of your insurance. Q. What is a premium? A premium is the amount you pay each year to have your property or personal effects insured. In relation to house insurance this also includes Fire Service levies, Earthquake Commission levies and GST. When you pay your premium, you accept the policy offered by the insurance company. Q. What is the sum insured? The sum insured is the amount of cover agreed between you and your insurance company in an insurance policy. Q. What is a claim? A claim is the payment or application for payment following a loss. For example, Moana's television is stolen. She goes to her insurance company to make a claim application. As Moana's policy is in order her claim is accepted and her TV is replaced. Q. What is an excess? An excess is the amount you pay for each claim you make. For example, you might pay the first $300 and the company pays anything in excess of that up to the policy limit. Excesses help keep the cost of premiums down because insurance companies don't have to pay for numerous small claims. The higher the voluntary excess, the lower the premium. This means you pay for minor damage and loss but your insurance company pays for major damage or loss. Q. What is indemnity value or present day value? Indemnity value is the cover for the cash value of an item, allowing for its age and condition. In other words indemnity value is based on how much it would cost to buy the item second-hand. For example, if your five-year-old TV is stolen, you will be paid whatever a five-year-old TV is worth. The point of indemnity value is that you are no better and no worse off after a loss. Q. What is replacement value or replacement cover? The replacement value covers the cost of repairing or replacing a lost or damaged item. Replacement will not automatically mean payment in cash to the replacement value of the lost or damaged item. If cash is preferred, the insurance company will only pay to the present day value of the item (ie. the indemnity value). Q. What is a No Claims Bonus? If you don't make a claim on your insurance for a certain period of time, your insurance company may offer you a discount on your premium. This premium discount is called a No Claims Bonus. Q. Who is a third party? A third party is any person other than you and the insurance company, involved in your claim. First Party - You (the insured) Second Party - Insurance company Third Party - Other person(s) involved Q. Am I covered if I leave items unattended in a public place and they are stolen? It depends on what happened. All insurance policies have a condition requiring you to protect your property. Your claim may be declined if you do not take reasonable care of your property. Q. What are "reasonable care" exclusions? When can my insurance company apply them? In most insurance policies this is the exclusion relating to reckless or willful acts. Reasonable care exclusions can be applied when your insurance company can show that you knew, or ought to have known, that your actions were likely to result in a claim. Q. Is my de facto covered by my policy, even if not named on the policy? This will depend on your insurance company. However, you will need to establish that a genuine de facto relationship exists. This may include how long you've been together, joint ownership of property, joint bank accounts, and other evidence of the permanence of the relationship.

3 3 To avoid any possible problems, your de facto should be named on your policy. Q. Are gay or lesbian couples considered to be in a de facto relationship? Yes. Q. As a parent, am I liable for damage caused by the negligence of my children? Before you are considered liable it must be shown that the claim resulted from your failure to provide proper supervision or instruction to your children. Q. What does it mean when an insurance company describes someone as "high risk"? Risk is the chance of a loss to an insurance company. For example, Josh is a young inexperienced driver. An insurance company would consider Josh a higher risk than his father who has been driving safely for many years. As a general rule the higher the risk, the higher the premium. Q. Can I insure a car / boat / stereo that I have borrowed from a friend? Generally, no. You must own the property to be able to insure it. Q. What is "malicious damage"? Malicious damage is intentional, purposeful, or deliberate damage. Most insurance companies do not cover theft or deliberate damage by a person who is legally at your home. For example, if a party gets out of control and your guests damage your property, you can't claim for it. Q. If my policy is for replacement cover, is the insurance company able to insist on replacing the item or can I ask for the cash? The insurance company has agreed to repair or replace the item and they can choose to do this rather than give you cash to do it yourself. In some instances it is more economical for insurance companies to replace items because they usually have bulk purchasing arrangements. Q. What is meant by the term 'gradual deterioration'? Gradual deterioration means damage that happens slowly over time. For example, you cannot claim for a new TV simply because the one you own is 14 years old and rundown through wear and tear. Insurance exists for damage or loss which is sudden and unexpected. We expect gradual deterioration to occur over time. Therefore it is not covered by insurance (although some insurance companies do provide limited cover for gradual deterioration from water ie. such as leaking pipes behind your shower).

4 4 A GUIDE TO PERSONAL INSURANCE RESOURCE 2.2 Premium A premium is the amount you pay each year to have insurance. Traditionally, premiums are paid annually. Other options include instalment payments and automatic payments from your bank account. You need to be aware that you pay more overall if you choose to pay in instalments. This is because it costs more to handle instalment payments than one annual payment. Discounts Discounts are sometimes available for equipment that reduces the risk of damage or loss, such as burglar alarms. Other discounts may be available for people over a certain age and for having other policies (such as contents and motor insurance) with the same company. Most companies also reward you for being claim-free. This is called a no-claims discount. Excess An excess on your policy means that you agree to pay a portion of a claim, and the company pays everything over and above the excess, up to the policy limit. For example, if you have an excess of $300, you will pay the first $300 worth of any damage and the company will pay the rest. If you have a limited budget, a higher voluntary excess is a good option. The higher the voluntary excess, the lower the premium. A higher voluntary excess means that you have to pay for any minor damage and losses, but you are covered against major disasters. Disclosure of relevant information You need to provide complete and accurate 'material information' (information which is important or relevant) when taking out or renewing a policy, or making a claim. This may include information which has not been asked for directly in the policy form. A material fact is one which may influence a prudent insurer in deciding whether or not to insure you, and if so, on what terms and conditions and for what premium. For instance, if you live in a flat rather than your own home, you should tell your insurer. If you're not sure which facts are considered material, discuss this with your insurer. Remember, if you don't disclose all material information, your insurer may refuse to pay your claim or even cancel your insurance from the starting date of the policy. EQCover The Earthquake Commission (EQC) insures all holders of house and/or contents insurance policies against earthquake, volcanic eruption, tsunami, hydrothermal activity and natural landslip damage. This is called EQCover. For house insurance, this is up to the lesser amount of: the replacement sum insured $1000 per square metre of floor area $100,000 (plus GST) For contents insurance, this is up to the lesser amount of either:

5 5 the sum insured $20,000 (plus GST) Most insurance companies provide top-up insurance for those who want to have cover above these amounts. Government levies All policies include a separate charge for government levies (plus GST) to fund the Earthquake Commission and the Fire Service. A levy of 5 cents per $100 insured is paid to the Earthquake Commission. A further levy of 6.2 cents per $100 insured is paid to the Fire Service Commission. Claims If your property has been lost, damaged or stolen, report the loss to your insurance company as soon as possible. Take with you any documents you have for the items such as receipts, valuations, and guarantee and warranty certificates. If your property has been stolen, notify the police immediately and get written confirmation that you have notified them. Types of cover Accidental damage "Accidental damage" cover protects your property against a wide range of risks, anywhere in the country. This covers you for accidental damage to and loss of your property, as well as a range of other benefits, which vary from policy to policy. Accidental damage house policies generally do not offer cover against the following: damage to retaining walls damage caused by alterations settling or cracking of the earth damage caused by animals, birds and insects gradual deterioration or wear and tear. Accidental damage contents policies generally do not offer cover against the following: damage caused by animals, birds (including pets) and insects wear and tear and gradual deterioration mechanical or electrical breakdown theft or intentional damage by people legally at your home. Some companies do cover some of these, so check with your insurance company for details. Restricted cover You can get policies that offer limited cover for named events such as flood, storm, fire, or theft. Premiums for restricted cover are usually lower than for accidental cover. HOUSE INSURANCE House insurance is designed to protect your most valuable asset, your house. It helps you get your house and your life back to normal as quickly as possible after anything from a broken window to a major catastrophe like a fire. Be clear about

6 6 exactly what cover is provided: not all situations are covered. Check it out with your insurance company. Types of cover Total replacement Most insurance companies offer total replacement or no sum insured insurance. This means that if your house is destroyed, the insurance company will rebuild the house and pay all the fees (such as architects' and site clearance fees) involved in the process. This sort of insurance policy is usually only available for houses that are owner-occupied, in good condition or under a certain age. Fixed sum insured (replacement) Under a fixed sum insured policy, you and your company agree on the sum insured, and the company will rebuild your house up to that limit if it is totally destroyed. With this type of cover, your sum insured may not be sufficient to totally replace your house. Indemnity policies (present day value) The indemnity value of a house is what it was worth just before a loss. It is roughly equivalent to the market value of the house (excluding the land). The disadvantage of indemnity value policies is that the amount you can claim is usually not enough to rebuild the house. On the other hand, if your house is in poor condition or you don't want to rebuild, an indemnity policy may be a good idea. CONTENTS INSURANCE Contents insurance covers the contents of your home: your household possessions, your furniture, your clothes, your appliances and your carpets and curtains. The most important things to check with contents insurance are what you're not covered for and what locations your cover applies to. Types of cover Replacement policies The insurance company will replace a lost or destroyed item with a new one or repair the item so it is as new. There are some limits to this. Most companies will replace furniture, furnishings or home appliances up to ten years old and carpets, blinds and curtains up to five years old. If you want to get full replacement cover for older items or for a wider range of items, this is available at a higher premium. With replacement insurance, the item is usually repaired or replaced. The insurance company will provide you with a new or repaired television, but it won't give you cash so you can choose to buy a new jacket instead if you feel like it. If you want the cash, you can only get the indemnity value of the item. There is also an upper limit on what you can claim, which is specified in the policy as the sum insured. Some insurance companies have open-ended policies, but you need to discuss this option with your insurer. Indemnity policies (present value) The basic idea behind an indemnity policy is that it puts you back in the same position you were in before the loss or damage occurred. You receive the value of the item allowing for its age and condition. The settlement is based on how much

7 7 you would pay for the item second-hand. For instance, if your five-year-old television is stolen, you are paid whatever a five-year-old television is worth. Restrictions Most contents policies have claims limits, especially for valuables, money, documents and collections. Some companies will provide extra cover at a price. Different policies have different restrictions. There may also be conditions to the cover. For example, insurers require you to tell them if you are leaving your house unoccupied for more than one month. Your cover could stop after that time if you don't notify them. JEWELLERY INSURANCE Jewellery is normally covered by contents insurance. Types of cover and valuations With most insurance policies, items of jewellery worth more than $1,000 must be listed and described in your policy. This description needs to be supported by a valuation - which means you may need to take them to a jeweller to decide their value. If the item is lost or stolen, the amount you receive from the insurance company is based on the indemnity or replacement value of the item, depending on the policy. Most jewellery depreciates over time and claims are usually settled on this basis. This means that the settlement reflects the present day value of the item, which takes into account age, wear and tear, and obsolescence. Check list Have accurate and up-to-date valuations of your jewellery, for both indemnity and replacement sums. Have your valuation updated at regular intervals, say every two years. Make sure items worth more than $1,000 are named in your policy. Keep documents proving ownership in a safe but separate place from your jewellery. Remember to keep all receipts and other documentation relating to the items. Photos of you wearing your jewellery are very helpful in proving ownership. How you can help reduce the chances of loss or damage Keep your jewellery in a locked container and in a secure, but not obvious place. Perhaps in a room other than a bedroom or bathroom - but not so unusual that you'll have trouble remembering where it is! Replace worn clasps or chains so your jewellery doesn't fall off. Some policies require that you have your jewellery examined for wear and tear regularly. Check your policy. WHAT TO LOOK FOR IN AN INSURANCE POLICY Plain English Most insurance policies these days are written in Plain English. Make sure you read all policies carefully before signing. If there is anything you don't understand, just ask your insurance company.

8 8 GST Most policies include GST. your policy includes GST. It's important to check whether the sum insured under Reputation You need to check the reputation of any company you're planning to do business with. This is easy to do, because almost everyone has had some experience with insurance companies. If your insurance company is a member of the Insurance Council you are covered by the Fair Insurance Code and the Insurance and Savings Ombudsman. You should also check the credit rating of the insurance company. This indicates its claims paying ability or its financial soundness. Check with your insurance company. MAKING A COMPLAINT Specific complaints are dealt with by your insurance company through its internal complaints process. If you and your company cannot reach agreement (deadlock), your insurance company will advise you about taking your complaint to the Insurance and Savings Ombudsman at no cost to you. The Ombudsman's decision is binding on your insurance company. INSURANCE COUNCIL OF NEW ZEALAND The Insurance Council of New Zealand is an association representing fire and general insurers. Members must comply with the Fair Insurance Code. Council membership is an assurance of quality to consumers. However, the Council cannot assume liability for its members. When buying insurance, consumers should make sure that the company is a member of the Council.

9 9 Introduction to Personal Insurance. Personal insurance includes the following types of insurance: House insurance Contents insurance Jewellery insurance (jewellery is normally covered by contents insurance) Types of Cover 1. Accidental Damage 2. Restricted Cover Contents Insurance RESOURCE 2.3 Protects your property against a wide range of risks, anywhere in the country. This covers you for accidental damage to and loss of your property, as well as a range of other benefits, which vary from policy to policy. Policies which offer limited cover for named events such as flood, storm, fire, or theft. Premiums for restricted cover are usually lower than for accidental cover. Contents insurance covers the contents of your home: Household possessions Furniture Clothes Appliances Carpets and curtains Most contents policies have claims limits, especially for valuables, money, documents and collections. Different policies have different restrictions. There may also be conditions to the cover. You should check these with your insurance company. Types of Cover There are two types of cover available: 1. Replacement Policies This means that the insurance company will replace a lost or destroyed item with a new one or repair the item so it is as new. However there are some limits to this (ie. items over a certain age may not be replaced). Check the wording of your insurance policy. With replacement insurance, the item is usually repaired or replaced. If you want the cash, you can only get the indemnity value of the item. There is also an upper limit on what you can claim. This is specified in the insurance policy as the sum insured. Open-ended policies are available from some insurance companies. 2. Indemnity Policies (present value) An indemnity policy puts you back in the same position you were in before the loss or damage occurred. The settlement is based on how much you would pay for the item second-hand. Helpful Tip: It is important to check in your policy what you are not covered for and what locations your cover applies to. Contents Insurance - Frequently Asked Questions RESOURCE 2.4

10 10 C. Do I have to provide documentary proof of ownership when claiming for contents items? Yes, in cases where it can be reasonably expected such as recent or major purchases. Most insurance companies insist on proof of ownership (ie. warranty or guarantee) which can also help with the description of the item, its age and value. Formal valuations are also important for jewellery, antiques and so on. R. If part of a lounge suite is damaged and the covering fabric is no longer available, does my insurance company pay to recover the whole suite or just the damaged piece? Most insurance companies pay only for the damaged item. If the fabric is unavailable, most insurance companies will contribute towards the cost of recovering the suite. R. I need to claim under both my house and contents policies for one event. Does the excess under both policies or just one apply? Both excesses can apply. However you will need to check this with your insurance company. R. What's the definition of a home appliance? Check the definition in your policy. This generally includes items such as the refrigerator, electric drill, and kitchen whiz. R. Is a Personal Computer (PC) a home appliance? Usually it is. However it does depend on what the computer is used for. If it is used for business purposes it is not a home appliance. A laptop is not a home appliance because it is designed to be portable and is often removed from your home. R. If I break a roof tile while steam cleaning my roof and water gets into my house, is it a claim? Or can my insurance company refuse on the basis of exclusion for the cleaning/ repairing/ restoring? This claim would probably be accepted. However it would only be for the resulting damage and not the broken tile itself. The exclusion for cleaning/repairing/restoring means coverage would not be provided for situations such as burning a hole in your shirt while ironing it, or your curtains being shrunk during dry-cleaning. R. Are my hired appliances covered under my contents policy? Yes. R. Are video cameras personal effects or household goods? Video cameras are personal effects because they are worn or carried. R. Is a bicycle covered for replacement value or indemnity value? Most insurance companies cover bicycles for indemnity value only. Check your policy. R. If I lose a piece of jewellery, how is the claim settled? This depends on your policy. If a piece of jewellery is lost or stolen the amount you receive from the insurance company is based on the indemnity or replacement value of the item. Most jewellery depreciates over time and claims are usually settled on this basis. This means that the settlement reflects the present day value of the item, which takes into account age, wear and tear, and obsolescence. To assist acceptance of your claim the Insurance Council recommends that valuations be obtained for valuable or sentimental pieces of jewellery and photographs taken.

11 11 RESOURCE 2.5 Introduction to Motor Vehicle Insurance. Motor vehicle insurance can cover you against the accidental loss of, or damage to, your motor vehicle, up to either its: a. Market Value This is what your vehicle is worth just before the damage occurs. b. Agreed Value This is where you and your insurance company agree on the value of the car at the beginning of the contract and at each renewal. If your car is written off, you are paid the agreed value in the policy. Motor vehicle insurance can also cover you against any damage you might cause to someone else's car or property. The two most important things to remember about motor vehicle insurance are: 1. You are only covered up to the limit stated in your policy, and 2. Your contract obliges you to take reasonable care to avoid accidents and theft. Types of Policies There are three types of policy: 1. Third Party Property Damage 2. Third Party, Fire and Theft 3. Comprehensive This only covers you against the damage you cause to someone else's vehicle and/or property. It is the least expensive type of car insurance. This covers damage caused by fire and theft to your vehicle as well as Third Party Property Damage. This covers you against accidental loss of, or damage to, your motor vehicle. It also covers you for any damage to other people's vehicles or property, whether it was your fault or someone else's, and for other costs such as salvaging your care from the accident scene and towing it to a repairer. As well as the standard policy, companies offer a wide variety of options and benefits. Generally, the more extensive the cover, the more expensive the policy.

12 12 Things to consider when insuring your motor vehicle RESOURCE 2.6 When insuring your motor vehicle it is important that you disclose all information that may affect the acceptance of the insurance. This is regardless of whether or not a specific question is asked. In addition to disclosing all previous losses and criminal convictions, it is likely your insurer will also want to know who is going to drive your motor vehicle and if you or the other drivers have had any accidents or traffic convictions, and whether your vehicle has been modified. Traffic Offences and Vehicle Modification When insuring a motor vehicle you should disclose: a. All traffic offences, including fines (ie. speed camera and other "instant fine" offences that do not go to Court), as well as non-driving related charges (ie. driving a vehicle without a current warrant of fitness or registration). b. All vehicle modifications that are not in accordance with the vehicle's original specifications. This may include (but is not limited to) engine, body, paintwork, wheels and tyres, suspension, and "internals" such as stereo, and seats. Insurers are interested in any modification which may increase the likelihood of a vehicle being involved in an accident (ie. something which makes the vehicle go faster), make the vehicle a more attractive theft target, or more expensive to repair. c. Your insurer may ask a separate question about driving disqualifications. If they do you must disclose any period of driving disqualification no matter when it happened. A disqualification may result from a specific offence such as drink driving, an accumulation of demerit points, or a non-traffic related offence (ie. a person can be disqualified from driving if they use a vehicle when committing a crime such as burglary). Do Not Insure Your Child's Car In Your Name Under 25-year-olds have higher premiums because they represent a greater insurance risk. Drivers under 25 years of age have a far higher number of accidents and claims than older drivers. Parents who try to reduce the cost of insurance for their children by insuring the vehicle in their own name are misleading the insurance company as to the identity of the principal driver. This is fraudulent. The insurance policy should be in the child's name - even if the parents are paying the premium.

13 13 Nominated Drivers If you choose a motor vehicle policy that restricts the people who drive your car to: Drivers you nominate, or Drivers over 25 years of age Then stick to it. You will not be covered if someone either under the age of 25 or not a nominated driver, drives your vehicle. Helpful Tip: If you have nominated your son or daughter as a driver of your vehicle, make sure you tell them that your insurance is restricted to nominated drivers only and not to hand the keys over to anyone else. Restricted Licences A person (usually teenagers) on a restricted licence must not drive between 10.00pm and 5.00am without a licensed adult supervisor, nor carry any passengers at any time without an adult supervisor. There is also a virtual ban on alcohol. Make sure the conditions are adhered to. As a restricted licence holder, if you have an accident while breaching the conditions of your licence, and this contributes to the accident, you will not be covered by insurance. Drink Driving The Insurance Council recommends you do not consume any alcohol before driving a motor vehicle. All insurance companies will decline a claim where: The driver is found to be over the legal alcohol limit, and The intoxication contributed to the crash. Some insurance companies may also reserve the right to decline your claim if: You were under the legal alcohol limit BUT The alcohol consumed contributed to the crash. Although most insurance companies have changed their policy wordings to being over the legal limit, you should check your policy wording to make sure.

14 14 Disqualified Driver Your insurance will usually be voided if you drive while disqualified or allow a disqualified driver to use your vehicle. Unsafe Vehicle If you drive a vehicle that has an obvious defect that causes a crash, it is likely you will not be insured. Defects that you should be aware of and have repaired include: Faulty steering Poor headlights Bald tyres, and Worn brakes Do not assume that a current warrant of fitness will protect you. If there is a defect you should have known about, and it caused your crash, that can still jeopardise your insurance. Hidden defects that you couldn't be expected to know about will not affect your insurance. Accidents Involving Uninsured Motorists Your private motor policy should automatically protect you when the other vehicle / driver involved in the accident is not insured: You won't lose your no-claims discount You won't have to pay the excess Provided - The other driver is positively identified The other driver is clearly at fault If you only have third party insurance you may still be able to claim for your own damage. Talk to your insurance company for more information about the Uninsured Motorist Extension (UME).

15 15 RESOURCE 2.7 Motor Insurance - Frequently Asked Questions C. What items are "accessories" in a motor vehicle policy? Accessories are any minor attachments designed for use in a motor vehicle but which the vehicle will still operate without. These may include (but is not limited to) radios, CD player, child car seat, tow bar, and roof rack. B. When could my insurance company use drivers' licensing exclusions? When it is proven that driving outside your license conditions contributed to your accident. D. If someone hits my car and they are not insured, who pays? Not you! Most companies have a benefit which means that people with insurance are automatically covered in accidents caused by uninsured people, as long as: The other driver is clearly at fault, and The other driver is positively identified. You will not lose your No Claims Bonus and you won't have to pay the excess if someone hits your car and they are not insured. If you only have third-party insurance, your insurance company may still provide cover for your damage up to the specified limit. S. My car was written off in an accident and my insurance company insists my car be deregistered. Should the refund of the cancelled registration go to the insurance company or to me? If your insurance company insists that your vehicle registration be cancelled, it is because they are complying with strict regulations. Any registration refund goes to your insurance company if they took over the damaged vehicle as part of the claims settlement.

16 16 RESOURCE 2.8 A GUIDE TO MOTOR INSURANCE Every year, one in six New Zealand policy holders will make a claim on their motor vehicle insurance, totalling over $300 million. That's why you should be insured. Motor vehicle insurance can cover you against the accidental loss off or damage to you vehicle, up to its market or agreed value. It can also cover you against any damage you might cause to someone else's car or property. The two most important things to remember about motor vehicle insurance are that you're only covered up to the limit stated in your policy, and your contract obliges you to take reasonable care to avoid accidents and theft. Market Value This is what your vehicle is worth just before damage occurs. If your car is written off, you are paid what an assessor considers the car was worth immediately before the accident happened. You should review the sum insured each year to make sure it matches the market value of your vehicle. Agreed Value This is where you and your insurance company agree on the value of the car at the beginning of the contract and at each renewal. If your car is written off, you are paid the agreed value in the policy. TYPES OF POLICIES Third Party Property Damage Even if you have no other motor vehicle insurance, you should have Third Party Property Damage. This only covers you against the damage you cause to someone else's vehicle and/or property. It's the least expensive type of car insurance, and it's a good deal for people with older cars that aren't worth insuring but still don t want to be hit by a heavy bill for damage caused to someone else's property. Third Party, Fire and Theft This type of policy covers damage caused by fire and theft to your vehicle as well as Third Party Property Damage. The advantage is that it provides you with cover for major risks at an affordable cost. The disadvantage is that you're not covered for any damage caused to your vehicle unless it's caused by fire or theft. This might be good policy for younger people facing higher premiums and excesses because of their age group's driving record and who might own cheaper, older vehicles. Comprehensive The Comprehensive policy covers you against accidental loss of or damage to your vehicle, as well as any damage to other people's vehicles or property, whether it was your fault or someone else's. It also covers other costs like salvaging your car from the accident scene and towing it to a repairer. As well as the standard policy, companies offer a wide variety of options and benefits. To get the best from your insurance, decide what cover you are most likely to need. Generally, the more extensive the cover, the more expensive the policy. Do you want the insurer to provide: costs of alternative transport such as a rental car?

17 17 automatic cover when you change vehicles? cover for trailers? a replacement vehicle if yours was less than one year old? no excess for windscreen claims? Your answers to these and any other questions will determine which company you insure with and at what price. Disclosure of relevant information Insurance is a contract between you and your insurer acting in utmost good faith. You need to provide complete and accurate 'material information' (information which is important or relevant) when taking out or renewing a policy, or making a claim. This may include information which has not been asked for directly in the policy form. A material fact is one which may influence a prudent insurer in deciding whether or not to insure you, and if so, at what terms and conditions and for what premium. An example of a material fact would be a previous driving conviction. If you're not sure which facts are considered material, discuss this with your insurer. Remember, if you don't disclose all material information, your insurer may refuse to pay your claim or even cancel your insurance from the starting date of the policy. PREMIUMS A premium is the amount you pay each year to have your vehicle covered by insurance. Premiums are traditionally paid annually, but other options can include monthly, quarterly or half-yearly payments. These can be automatically deducted from your bank account. Installments generally cost more, because it costs the company more to handle installments than it does to process one annual payment. Premium rates can be based on: the age and sex of the main driver and their accident record who else may be driving the vehicle where the vehicle is used or kept whatthevehicleisusedfor the vehicle's value previous claims record. Your premium and excess may be higher if the vehicle: is parked overnight on the street so is more likely to be stolen is a commercial vehicle, so is driven more and is more likely to be involved in an accident has a young or inexperienced driver has a driver with previous traffic convictions is an exotic import with expensive and hard-to-get parts. Government levies All policies include a separate charge to fund the Fire Service. The Earthquake Commission no longer provides cover for vehicles. Cover for earthquakes is now available from insurance companies.

18 18 Excess An excess is the amount you pay for each claim you make. For example, you might pay the first $250 and the company pays everything above that, up to the policy limit. Excesses help keep the cost of premiums down because insurers don't have to pay for numerous small claims. Standard excesses may range from $250 to $500, but there are other excesses which may apply. Drivers under 25 and those who have had their licence for less than two years face additional excesses because they pose the greatest risks. Choosing a higher voluntary excess will reduce the cost of your premium. Obviously, the higher your voluntary excess, the greater the discount. This makes sense for those who want to take part of the risk for any damage they may cause or suffer. DISCOUNTS No Claims Bonus The most common form of discount is the No Claims Bonus. If you haven't made any claims, your insurance company views you as less of a risk and reduces your premium to reward you for this. While the size of the discounts varies from company to company, you can save up to 65 percent of your premium if you have not made a claim in the pat three or four years. If you are changing companies, your new insurer will ask you for your claims record from the previous company. This is a standard arrangement between insurance companies. Named drivers You can get a discount from some companies if you restrict the number or age of drivers covered on the policy. Be warned: with this restriction, damage caused by an unnamed driver of your car (other than by theft) may not be covered. Glass claims At this is one of the most common claims, there are a variety of benefits and discounts for windscreen and glass insurance. Some companies offer a benefit where, for a higher premium, you can have glass claims paid without having to pay the excess or losing your No Claims Bonus. Other companies will allow you to exclude windscreen damage from your policy, which usually means you get a discount or a lower excess. Other discounts The car insurance market is intensely competitive, so many companies offer a range of discounts. These can include: lower rates for older age groups burglar alarms all named drivers being over 25 abstinence from alcohol placing other insurance with the company. MAKING A CLAIM After an accident

19 19 Report your claim to your insurer as soon as possible. In most cases an assessor will make an assessment of how much it will cost to repair the damage. If the damage is extensive and you have market value cover, the company will get a qualified motor vehicle dealer to assess the market value of the vehicle at the time of the accident. If it's uneconomical to repair, the vehicle may be written off. A write-off is not necessarily a total wreck. Sometimes the damage is repairable, but the cost of the repairs is too high as a proportion of the market value of the vehicle. For instance, $1200 worth of damage on a $1500 car is not usually worth repairing. If your vehicle is written off, what you are paid depends on the type of cover you have (market or agreed value). If this happens, your insurance cover will have been used up. This means there is no refund of the premium for the unused part of the year. If your insurer insists that your vehicle must be reregistered, it is because they are complying with strict Land Transport Safety Authority regulations about this. Disputes You may not agree with either the damage assessment, the market value or the cash settlement offered for the vehicle. You can get a second opinion from a recognised expert (that is, another panelbeater or a qualified motor vehicle dealer) but the company does not have to accept that opinion. The final decision often represents a compromise between the two values. If you feel that the vehicle has not been repaired to a satisfactory standard, notify your insurance company. You will need to prove that the repairs were inadequate. Don't sign the discharge (a form which closes the claim) until you are satisfied with the repair and you don't want to make any further claim for that particular accident. Excess and No Claims Bonus Normally, when you make a claim you may lose part or all of your No Claims Bonus and pay the excess stated in the policy. If the other driver is identified and is entirely at fault, you keep your No Claims Bonus and your excess is refunded. This is because your insurer may be able to recover costs from the other person's insurance company. All companies have policies which provide extra cover if your vehicle is damaged by an uninsured driver. As long as the other driver is identified and is clearly at fault, your company pays your excess and you keep your No Claims Bonus. If the question of fault is disputed, you may not recover your excess or have your No Claims Bonus reinstated until the matter is settled. Reasonable care An insurance policy is a contract, and you have an obligation to take good care of your vehicle. This means not putting your vehicle at risk of theft or damage. For example, if you left your keys in an unlocked vehicle, the company may consider that you had not taken reasonable care. The general rule for reasonable care is common sense - would you act in the same way if you were not insured? The same principle applies to alcohol. A driver over the legal limit will not be covered. If a driver has been drinking but is under the limit, the company may decline the claim where that drinking contributed to the accident. Alcohol slows down reactions and affects judgement. Insurers can also decline claims where the influence of illegal drugs contributed to the accident. Also, be sure to follow the advice of your pharmacist when taking

20 20 prescription drugs, which can lessen driving judgement, especially if combined with alcohol. Reasonable care includes making sure you are driving within the law. You must also be careful to drive within the conditions of your licence. If you break these conditions, you may be disqualified from making a claim. For example, a driver on a restricted licence must not drive between the hours of 10pm and 5am.

21 21 WHAT TO LOOK FOR IN AN INSURANCE POLICY Plain English Most insurance policies these days are written in Plain English. Make sure you read all policies carefully before signing. If there is anything you don't understand, just ask your insurance company. Reputation You need to check the reputation of any company you're planning to do business with. This is easy to do, because almost everyone has had some experience with insurance companies. If your insurance company is a member of the Insurance Council you are covered by the Fair Insurance Code and the Insurance and Savings Ombudsman. You should also check the credit rating of the insurance company. This indicates its claims paying ability or its financial soundness. Check with your insurance company. MAKING A COMPLAINT Specific complaints are dealt with by your insurance company through its internal complaints process. If you and your company cannot reach agreement (deadlock), your insurance company will advise you about taking your complaint to the Insurance and Savings Ombudsman at no cost to you. The Ombudsman's decision is binding on your insurance company. INSURANCE COUNICL OF NEW ZEALAND The Insurance Council of New Zealand is an association representing fire and general insurers. Members must comply with the Fair Insurance Code. Council membership is an assurance of quality to consumers. However, the Council cannot assume liability for its members. When buying insurance, consumers should make sure that the company is a member of the Council.