Types of insurance
There are many different kinds of insurance available. Here are some of the better known types and an explanation of what they cover.
Life insurance
Term life insurance Pays out on the death of the person insured
Disability insurance
Trauma or critical illness Pays you a lump sum if you are diagnosed with any of the illnesses
specified in the policy. Cover may be purchased separately or added to your term life insurance.
Total and permanent disablement You can sometimes add total and permanent disablement cover
to term life insurance. This will pay out if you have a serious illness or accident that means you will never work again.
Income protection insurance
Income protection Cover to replace some of your income if illness stops you from working
Redundancy insurance Cover to replace a portion of your regular income if you are made redundant. Can be a policy on its own or attached to life insurance. These policies often need to be in place for six months before a claim can be made and are usually purchased as part of mortgage repayment or loan insurance.
Debt insurance
Mortgage protection insurance Similar to term life insurance. Pays out enough on your death to cover the amount of your mortgage Can also be purchased as mortgage repayment insurance which
will replace regular mortgage repayments if you are unable to work through illness or accident
Loan insurance Similar to mortgage protection but designed to cover smaller personal loans
Can also be purchased as loan repayment insurance, which will replace regular loan repayments if you are unable to work through illness or accident.
General insurance
Motor vehicle insurance There are three types of policy: Third party – cover for damage you do to someone else’s vehicle and property Third party, fire and theft – cover for third party (as above) and
for damage or loss caused by fire or theft to your vehicle Comprehensive – cover for all of the above and for accidental loss of, or damage to, your vehicle. Home insurance Covers fire and other property damage to your home. It can cover full ‘replacement’ or can be ‘indemnity’ – just the insured
value at the time. Contents Covers damage and loss of your house contents. Also provides
some third party cover if you damage someone else’s belongings in the house you are living in
Travel Covers costs associated with unavoidable disruption to your travel, baggage loss, money theft
Boat Covers damage to, or loss of, your boat
Health insurance
Elective surgical (major medical) Covers you for health problems that require hospital care and
can sometimes include costs relating to the diagnosis. (The public health service provides emergency and urgent care.) Comprehensive Covers primary health care costs, such as doctors visits, as well
as surgical and hospital costs
Compulsory insurance
The government also provides some types of insurance. Usually there’s no choice about having these.
ACC Cover ACC covers you for injuries following an accident. The cover includes most treatment costs and can include compensation of up to 80% of your average weekly income before your accident. You pay a share of the ACC premiums through PAYE deductions from your salary. EQCover When you buy an insurance policy for your home or your personal belongings, your insurance company passes on a disaster insurance premium to the Earthquake Commission. This gives you EQCover.
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