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However, it’s important to remember that, like a parachute, unless you have an insurance plan strapped on yourself before something bad happens, you will end up in big trouble.

Do we really need insurance?

When people hear about insurance, it’s usually something people ignore or view as an unnecessary expense. However, it’s important to remember that, like a parachute, unless you have an insurance plan strapped on yourself before something bad happens, you will end up in big trouble.

To make insurance easier to understand, let’s talk about the two main types of insurance plans: Physical Damage and Personal Cover

I. Physical Damage

Physical Damage insurance plans cover unforeseen events that involve personal property such as your house and possessions. It also covers losses of rent due to unforeseen damage caused by tenants if you are a landlord.

1. Home

When applying for home insurance, the following details are usually taken note of:

a. House specifications
b. Rooms and structure
c. Compliance, demolition, and removal fees

It’s also good to remember that home insurance usually covers every domestic building within the property. This includes garages, fences, and pools. Additionally, events and expenses such as earthquakes, war damages, and fire service levies are also included.

2. Possessions

To properly claim possession insurance, it must be proven that these are goods located within your home, belong to you, hired by you, or are within your custody or control.

3. Rent

Rent insurance is useful for landlords as it covers loss of income due to tenants damaging a property that they are currently renting out. Common examples of this are intentional acts of damage, vandalism, and theft.
Additionally, rent insurance also covers loss of rent during the period at which the property of the landlord was deemed unfit for occupancy. This is usually due to property damage caused by tenants or the eviction of tenants due to non-payment of rent.

II. Personal Cover

Personal Cover insurance plans include unforeseen events that involve life, your income, and mortgage repayment.

1. Life

Life insurance covers unforeseen events that may cause someone’s life to end prematurely. This insurance plan is designed to help support your loved ones upon your premature passing by providing a single payment of money.

2. Income

Income insurance covers unforeseen events that may render you unable to perform work, preventing you from getting your salary. This is useful for individuals that depend on a primary source of income to support their lifestyle and family.
It is also important to remember the difference between seeking support from an Accident Compensation Corporation (ACC) claim and an Income Protection insurance. To claim payment from an ACC claim, you must be able to prove that your absence has directly caused your company to incur a loss in income. Therefore, to cover a wider range of circumstances, it is recommended to apply for both ACC and an Income Protection insurance plan.

3. Mortgage Repayment

Mortgage repayment insurance helps you continue paying for your mortgage in case of unforeseen events that may cause you to be unable to pay for the required fees. This type of insurance allows you to cover:

a. 115% of your mortgage repayments
b. 45% of your income
c. 115% of rental payments (as a tenant)

It's always better to be prepared

Having an optimistic outlook on life is nice. However, it is also important to be realistic. It’s always better to be prepared for the unforeseen events of life by applying for an insurance plan before trouble arises.

About the author

Tracey Munns is the Co-founder and CEO of VerdiPlus and a specialist in personal wealth creation. She is an engaging energetic business person widely experienced in aspects of the financial services industry. Tracey holds a Bachelor of Commerce, is a Registered Financial Adviser and a noted businesswoman and public speaker. Her passion is to help as many people as she can to 'love their finances and change their lives'