Navigate Insurance: Step 7 of 8 to Financial Security

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Insurance takes unfortunate situations in our life and makes it affordable.

You’ve been busy building up your financial security:

  1. the budget
  2. working system,
  3. topped-up emergency fund,
  4. dropped debt.

And you’ve also looked into:

  1. KiwiSaver, and
  2. investing.

The next step is insurance, cementing your financial security. We will cover why insurance is important, the different types of insurance and how to step up your insurance for success.

Why should I have Insurance?

Anything that can go wrong will go wrong
—Murphy’s Law

When you go skydiving, insurance is your backup parachute. If things go wrong, I mean very wrong, like your first chute not deploying, what’s there to save you?

Some examples of a failing first parachute:

  • An unexpected health problem
  • Losing or breaking your prescription glasses
  • Your house burning down

If you are not insured, you’re jumping out with just one chute. These scenarios can cripple you financially, putting you in debt, taking all your money, and even leaving you bankrupt.

Most times the first chute will work. But what about the times it won’t? And isn’t it just a nice feeling to have a backup just in case? Insurance gives you peace of mind without the need to tiptoe your way around life, acting as a psychological benefit.

What types of Insurance can I get?

There are many things you can get personally insured. The most common include:

  • Vehicle
  • Contents
  • Health
  • Life
  • Travel

Let’s cover these in greater detail.


There are usually three tiers of vehicle insurance, cheapest first to most expensive:

  • Third-Party Only
  • Fire and Theft
  • Comprehensive Cover

Third-party only covers other drivers. Damage to their car is covered; you cover damaged to yours.

If your car gets stolen or damaged in an event that doesn’t involve another party (e.g. fire), then you have to flip that bill.

Fire and theft includes third-party, but now if your car is stolen or damaged in a fire, then it is covered. Still, if you hit someone, and you car is damaged, you must cover the costs of fixing your own car.

Comprehensive cover involves cover for third-party and fire and theft, but now if you are is damaged it will be covered.

Third-party and fire and theft options should only be chosen if your car is not worth much and you are able to replace the car with a decent cash reserve, or if you are unable to afford more comprehensive insurance.


Contents insurance covers belongings in your household. Some policies can cover special items when traveling around the country (e.g. camera or laptop).

Certain items will only be covered up to a particular amount. Some items are covered more than others (e.g. jewelry vs tech gadgets).

It is important to check how much. You might want it to be insured for more, but this will increase your premium.


Health insurance can cover major surgeries, diagnostic tests, and specialist consultations. You can get add-ons that involve visits to the dentist or optometrist, and even the GP doctor.

New Zealand has an amazing public health system. However, for most things that are not going to kill you (e.g. cataracts), then you are on a long waiting list. If you want to be seen soon and to pick who you want to see then private medical insurance is your ticket.

Personally, I’ve seen a lot of people skip out on this. Remember you are the most important asset. It would be silly to insure your car or things in your home but not in the care of yourself.

The earlier you get health insurance, the better. Health insurance makes it difficult to cover pre-existing conditions (e.g. asthma). The older you get, the more of these you will get. If you have health insurance earlier, then you will be covered when these conditions come up.


Holidays are for relaxation. Holidays that go wrong aren’t.

A holiday that went wrong can include getting sick overseas. Like I did. I was stuck in a hospital bed in Sri Lanka with Dengue Fever. I was due to fly out as well, so tickets had to be changed. All covered by travel insurance.

If you lose items overseas (e.g. a ring, your glasses), since this is outside the country, contents insurance won’t cover so that is why travel insurance is important.


Why should I care when I die, right?

Not only do your friends and family celebrate mourn your loss, they are left with expensive funeral bills. If you have money stashed away for this, then you won’t burden your family as much.

However, if you have a mortgage or dependents, you don’t want your family, who are already coming to grips with your loss, dealing with your debt as well.

What are the costs for Insurance?

Insurance involves two costs:

  • A Premium – a regular payment made fortnightly, monthly, or yearly.
  • An Excess – a payment made when you make a claim.

The premium depends on how much you have covered. If you have higher cover and more things covered then you will be paying a higher premium. A way to reduce this premium is to increase your excess. The excess is declared before you have many claims.

How do I make the most out of Insurance?

Maximising you insurance is the key.

Cover things you cannot afford. Cancer treatment? I don’t think you have a spare $100K floating around. A GP visit? I’m sure you can put some money away for this rather than paying a higher premium.

If you are not sure what to insure, over-insuring is always better than underinsuring. Thinking this is a waste of money? All insurance does is share the money to those who need it. And for the people who need it, its hardly like winning the lottery. These individuals have had a life-altering diagnosis, their house destroyed, their beloved possession taken. Now, you won’t feel short-changed.

Be honest. Fraud is what makes premiums go up. So, I’ll say it again, please be honest.

Having an emergency fund is important to keep your premiums low. The emergency fund can be used to pay the excess is paid when you make a claim. We do not expect to make claims often. In fact, your premium is reduced even more with fewer claims. Additionally, your emergency fund can be used to self-insure things you can afford like a minor surgery or getting your tooth pulled out.

Pay your insurance yearly. This will save you more. If you cannot afford to now, pay monthly or whatever routine you can afford, then start putting money away for the yearly premium. For example, a $400 annual insurance premium is just under $8 needed to save per week.

Try not to claim too much. Insurance should be used for big things like losing your home. If possible, try not to claim small items like your phone. Self-insure using your emergency fund instead. Insurance companies reward with a no claims bonus.


Insurance protects you from the very unlucky circumstances that life throws at us. Sometimes a strong emergency fund is not enough. Not only can insurance protect you financially, but it gives you peace of mind as well.

There are different types of insurances to consider like vehicle, contents, health, travel, and life.

Costs associated with insurance include a regular expense, the premium, and an expense when you make the claim, the excess.

To make the most out of insurance:

  • Cover what you cannot afford
  • Over-insure if unsure
  • Be honest
  • Have an emergency fund to maximise the excess
  • Pay premiums yearly
  • Claim only when you really need to

After this, you financial security will be bolstered even more. If you found this useful, please send this to family and friends if you think it will help them out.

Thank you for reading.

Finally, as a disclaimer, I am not a financial expert or legal expert on insurance. I would encourage you to do your own research or seek an expert opinion. All decisions are up to you.

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