Understanding Your Insurance Policy & the Laws that Protect You
Insurance policies can sometimes be complex and confusing. When there is confusion, people may sign up for insurance on unfavorable terms. In response to these issues, New Zealand has detailed laws governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be advertised and sold. The various statutes that relate to the insurance industry are listed below. Search online to find more information:
- Insurance Companies (Ratings and Inspection) Act 1994 Insurance-Policy-Insured-Policies;
- Insurance Companies Deposits Act 1953;
- Insurance Law Reform Act 1977;
- Insurance Law Reform Act 1985.
Other legislation designed to protect the consumer’s interests:
- Fair Trading Act 1986;
- Consumer Guarantes Act 1993;
- Human Rights Act 1993;
- Privacy Act 1993;
- Disputes Tribunals Act 1998;
If you have signed up for an insurance policy you don’t completely understand, check online to see if the insurance provider has followed the proper protocol required of them under the above laws.
An insurance policy is also known as an insurance contract. It is a contract whereby the insurer will pay the insured if certain events occur. The event must be uncertain. The uncertainty can be either as to when the event will happen (i.e., in a life insurance policy, the time of the insured’s death is uncertain, etc.) or if it will happen at all (i.e., a fire insurance policy).
- Insurance policies or insurance contracts are typically considered contracts of adhesion because the insurance company draws up the contract and the insured has little or no ability to make material changes to it.
- Insurance policies are aleatory, meaning that the amounts exchanged by the insured and insurance company are unequal and depend upon uncertain future events.
- Insurance policies are unilateral. This means that only the insurance company makes legally enforceable promises in the policy. The insured is not required to pay the insurance premiums, but the insurance company is required to pay the benefits under the policy if the insured has paid the premiums and meet other basic provisions.
- Insurance policies are governed by the principle of utmost good faith. This requires both parties of the insurance policy to deal in good faith. You, the insured, have a duty to disclose all material facts that relate to the risk to be covered.
Parts of an Insurance Policy
Your insurance policy should have the following parts:
- Definitions – Important terms used in the policy language should be provided (like a glossary of terms etc.).
- Insuring agreement – Describes the covered perils, risks assumed, nature of coverage or makes some reference to the contractual agreement between insurance company and insured. It summarises the major promises of the insurance company, as well as stating what is covered.
- Declarations – Identifies the insured, the insured’s address, the insuring company, what risks or property is covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount.
- Exclusions – Takes coverage away from the Insuring agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
- Conditions – Provisions, rules of conduct, duties and obligations required for coverage. If policy conditions are not meet, the insurer can deny the claim.