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Types of insurance

Insurance is when a company guarantees they will pay you for any specific loss – like damage of a cell phone or car, among other things – as long as you pay them a premium (or regular payment).

You can get insurance for a lot of different things. The main kinds of general insurance you might find most useful are:

  • contents
  • vehicle
  • travel.

Contents insurance

Contents insurance can include your Xbox, phone, computers and anything else of yours that is kept with you or in your flat/home. From a stain from a spilled drink to a lost bag or wallet, contents insurance comes in handy if something goes wrong involving your belongings, including damage, loss or theft.

Vehicle insurance

When driving, you've got a responsibility to cover the cost of any damage done in an accident that is your fault. If you can’t afford to replace someone’s flash new car you will need insurance to balance the risk of being on the road.

The three types of car insurance

  1. Comprehensive insurance covers damage to your car and the other person's car if you're in an accident. It also covers you if your car gets stolen. It is more expensive that the other two options but also offers the most coverage.
  2. Third party, fire and theft insurance is an option that will cover damage to other peoples' cars but not yours if you're at fault in an accident. It will however, cover your car if it catches fire or is stolen. This can be a good option if you believe you are a safe driver.
  3. Third party insurance pays for the damage done to another person's car - but not yours. It's less expensive than the other types of car insurance, but means you won't be reimbursed for any necessary repairs to your car after an accident, fire or theft. It's a lower cost option worth considering if you have a low value car.

Travel insurance

Going travelling? Do you have luggage or more than one flight? Can you afford to replace everything in your luggage if it gets lost or buy a new flight if you miss a connecting one? And what if you get sick or injured while away? Not every country has the same healthcare that Aotearoa New Zealand does. If you can’t afford the risk – mitigate it! (Mitigating risk just means getting rid of as much of it as you can). You can mitigate risks while travelling by buying insurance – before you leave for your travel.

Buying insurance

There are two main costs to insurance.

  1. The premium, which is usually paid every month, but can be paid yearly, pays for the contract of insurance. You pay the premium just to have insurance coverage.
  2. The excess is the second cost, and is paid if something happens to you or your things and you need to use the insurance. This cost is determined when you first buy your insurance and can range. The higher your excess cost, the lower your premium will be.

Whatever the insurance you think you’ll need, an insurance company will sell it. Be cautious not to buy more coverage than you need, as they may try to up-sell you. Be really clear about what you want covered and an insurance provider can help. 

When you are shopping for insurance, talk to  a least a few different companies and get a few different quotes as some insurance providers have better deals than others for young people.

Below are some resources that can help you understand what kind of insurances you need, and when.

Useful links:

Key websites

  • Sorted: Sorted is a personal finance site that has the tools and information you need to tackle debt, plan and budget, save and invest, dial up your KiwiSaver, plan for retirement, protect what's important, and take on a mortgage. Sorted lets you fine-tune your finances and get ahead moneywise.

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