Insurance is supposed to provide financial protection and peace of mind, yet thousands of New Zealanders unknowingly make critical mistakes that leave them underinsured, overpaying, or worse—discovering they're not covered when they need it most.
From underestimating earthquake risks to not comparing quotes annually, these common errors cost Kiwi families an estimated $50-100 million in unnecessary premiums and uncovered losses each year. The good news? Every single mistake is preventable with the right knowledge.
This guide reveals the 10 most expensive insurance mistakes New Zealanders make across car, health, home, life, travel, pet, and business insurance. More importantly, you'll learn exactly how to avoid each one, potentially saving thousands of dollars while ensuring you have the protection you actually need.
Not Comparing Quotes Annually
The Mistake:
Setting and forgetting your insurance policies, staying with the same provider year after year without checking if you're getting the best deal. Over 60% of New Zealanders have never compared their insurance quotes.
Why It's Costly:
Insurance companies often reward new customers with discounted rates while gradually increasing premiums for loyal existing customers. This "loyalty tax" means you could be paying 20-40% more than someone with identical coverage from a competitor. For a typical family with car, home, and health insurance, this mistake costs $800-$2,000 annually.
Insurers bank on customer inertia—the tendency to stick with the status quo rather than shop around. They know most people won't bother comparing quotes each year, allowing them to increase premiums well above inflation without losing customers. Meanwhile, they offer aggressive discounts to attract new business, creating a two-tier pricing system that penalizes loyalty.
How to Avoid It:
- ✓Set an annual calendar reminder 6-8 weeks before your policy renewal to compare quotes from at least 3-5 providers.
- ✓Use comparison websites like InsureNZ to get multiple quotes in minutes rather than contacting each insurer individually.
- ✓Don't just compare price—review coverage limits, excesses, exclusions, and claim processes to ensure like-for-like comparisons.
- ✓Negotiate with your current insurer using competitor quotes as leverage—many will match or beat competitor pricing to retain you.
- ✓Consider switching providers every 2-3 years to take advantage of new customer discounts, even if you negotiate better rates with your current insurer.
Underinsuring Your Home and Contents
The Mistake:
Setting your home and contents insurance sum insured too low, either to save on premiums or because you haven't updated values as building costs and possessions have increased. This is particularly common with contents insurance where people significantly underestimate what they own.
Why It's Costly:
If your home is underinsured and suffers major damage or total loss, you'll only receive a percentage of the actual rebuild cost, potentially leaving you tens or hundreds of thousands of dollars short. Many insurers include "average clauses" meaning if you're underinsured by 20%, they'll only pay 80% of any claim, even small ones.
Building costs in New Zealand have increased 45-60% since 2020 due to supply chain issues, labor shortages, and material costs. A home valued at $400,000 in 2020 might cost $650,000 to rebuild today. Contents are equally underestimated—the average NZ household has $80,000-$120,000 worth of possessions, but most insure for only $50,000-$60,000.
Real Example: A Wellington family insured their home for $500,000 (the purchase price). After a fire, the rebuild cost was $750,000. Because they were underinsured by 33%, the insurer only paid 67% of the claim—$502,500—leaving them $247,500 out of pocket.
How to Avoid It:
- ✓Use a rebuild cost calculator from your insurer or get a professional quantity surveyor assessment ($400-$800) to determine accurate rebuild costs—not market value.
- ✓Review and update your sum insured annually to account for building cost increases, renovations, and inflation. Most insurers recommend increasing by 5-8% annually.
- ✓Create a detailed contents inventory room by room, photographing valuable items. Most households are surprised to find they own $20,000-$40,000 more than they thought.
- ✓Consider "sum insured plus" or replacement value policies that automatically adjust for inflation and building cost increases without annual reviews.
- ✓Specify valuable items separately—jewelry, art, electronics over $2,000—as they may have per-item limits under standard contents policies.
Ignoring NZ-Specific Risks: Earthquakes, Flooding, and Landslips
The Mistake:
Assuming standard insurance automatically covers New Zealand's unique natural disaster risks, particularly earthquakes, flooding, and landslips. Many Kiwis don't understand what EQC covers versus private insurance, or they decline optional flood/landslip cover to save money.
Why It's Costly:
The Earthquake Commission (EQC) only covers the first $150,000 of residential building damage and $20,000 of land damage from earthquakes and natural landslips. Your private insurer covers the rest. However, EQC doesn't cover flooding at all—you need specific flood cover from your private insurer, which many policies exclude unless explicitly added.
New Zealand faces regular earthquake activity, and climate change is increasing flood risks nationwide. Wellington, for instance, sits on major fault lines with a 75% chance of a magnitude 7+ earthquake in the next 50 years. Meanwhile, flood maps show 675,000 NZ properties (1 in 6) at risk of flooding.
Real Example: After the 2016 Kaikoura earthquake, some homeowners with properties worth $800,000 received only $150,000 from EQC because they'd opted for "EQC-only" cover to save on premiums, leaving them $650,000 short of rebuild costs.
How to Avoid It:
- ✓Ensure your private insurance covers above the EQC cap ($150,000 for buildings) so you have full replacement cover for earthquake damage.
- ✓Check council flood maps at your local council website to understand your property's flood risk, then ensure you have appropriate flood cover if at risk.
- ✓Add flood and landslip extensions to your policy if you're in a high-risk area—it typically costs an additional 10-20% but provides essential protection.
- ✓Understand the difference between natural and storm-water flooding—many policies cover storm-water but exclude river/sea flooding unless specifically added.
- ✓Review coverage after major NZ natural disasters as insurers often change terms, excesses, and availability of cover in affected regions.
Delaying Health Insurance Until You're Older
The Mistake:
Waiting until your 40s or 50s to purchase health insurance, thinking you'll save money by avoiding premiums while you're young and healthy. By the time you decide you need coverage, pre-existing conditions have developed and premiums are significantly higher.
Why It's Costly:
Health insurance premiums in New Zealand are age-based and increase dramatically as you get older—roughly doubling between ages 30 and 60. More critically, any health conditions that develop before you join are considered pre-existing and are either excluded from coverage or subject to 20-50% premium loadings.
A 30-year-old pays approximately $1,500/year for comprehensive health insurance. By waiting until age 50, that same person pays $4,500/year—triple the cost. Plus, if they've developed diabetes, high blood pressure, or other common conditions in those 20 years, they'll face exclusions or loadings costing thousands more annually.
Lifetime Cost Example: Someone joining at 30 and keeping coverage until 65 pays approximately $160,000 in total premiums. Waiting until 50 means they pay $200,000 for only 15 years of coverage, miss out on 20 years of protection, and likely have pre-existing condition exclusions reducing the policy's value.
How to Avoid It:
- ✓Start health insurance by age 30 or as soon as financially feasible—premiums are lowest and you'll lock in coverage before any conditions develop.
- ✓Begin with basic surgical cover if budget is tight (around $800-$1,000/year for a 30-year-old) rather than waiting to afford comprehensive cover.
- ✓Maintain continuous coverage once you start—even if you need to downgrade coverage temporarily, keeping some insurance prevents pre-existing condition issues.
- ✓Understand that after 3-5 years of continuous coverage, new conditions that develop are covered—this is the key benefit of joining early.
- ✓Calculate lifetime costs, not just current premiums—what seems expensive at 30 ($125/month) is cheaper over a lifetime than starting at 50 ($375/month) with limited coverage.
Not Disclosing Information or Vehicle Modifications
The Mistake:
Failing to disclose important information to your insurer, whether it's health conditions, previous claims, traffic violations, or vehicle modifications. Many people also "forget" to mention changes during the policy period, such as installing a turbo or getting a speeding ticket.
Why It's Costly:
Non-disclosure or misrepresentation gives insurers grounds to deny your entire claim, even if the undisclosed information isn't related to the claim. This is called "material non-disclosure" and it voids your policy. You lose all your premiums paid and receive nothing when you need the insurance most.
For car insurance, this commonly involves modifications. A simple aftermarket exhaust, lowered suspension, or performance chip must be declared. For health insurance, failing to mention a past medical condition—even if minor—can result in claim denial. The Insurance & Financial Services Ombudsman receives over 500 complaints annually about declined claims due to non-disclosure.
Real Example: An Auckland driver installed a turbo on his vehicle but didn't update his insurance. After an accident causing $35,000 in damage, the insurer denied the entire claim. The driver lost his $900 annual premium and faced $35,000 in repair costs—all because of one undisclosed $3,000 modification.
How to Avoid It:
- ✓Disclose everything when applying—if you're unsure whether something matters, declare it anyway. Let the insurer decide its relevance.
- ✓Notify your insurer of any changes within 7-14 days—modifications, traffic violations, address changes, new drivers, medical diagnoses.
- ✓Keep written records of all disclosures and insurer responses—emails, letters, or notes from phone calls confirming what you've disclosed.
- ✓Review your policy document when it arrives to ensure all disclosed information is correctly recorded—errors happen and you need to correct them immediately.
- ✓Understand that "I forgot" or "I didn't think it mattered" are not valid defenses—the duty of disclosure is on you, and ignorance provides no protection.
Having Inadequate Life Insurance Coverage
The Mistake:
Relying solely on employer-provided life insurance (typically 1-2x annual salary) or having no life insurance at all. Many Kiwis assume ACC will cover their family if something happens, not realizing ACC only covers accidents and has limited payouts.
Why It's Costly:
Inadequate life insurance leaves your family financially vulnerable if you die or become seriously ill. ACC provides only $158,780 (2025 rate) for accidental death and weekly compensation capped at 80% of earnings up to $142,283/year. It doesn't cover death from illness (heart disease, cancer) which accounts for 92% of deaths in New Zealand.
Financial advisers recommend life insurance coverage of 8-10 times your annual income, plus enough to pay off the mortgage. For a 40-year-old earning $80,000 with a $500,000 mortgage and two children, adequate coverage is approximately $1.1-1.3 million. Yet the average New Zealand life insurance policy is only $250,000—far too low.
Real Example: A Wellington father with $100,000 employer life insurance died of cancer at 42, leaving his wife with a $480,000 mortgage and two young children. The $100,000 covered funeral costs and six months of mortgage payments, but the family had to sell their home as his wife couldn't afford payments on her single income.
How to Avoid It:
- ✓Calculate your coverage need properly: Mortgage balance + 8-10x annual income + children's education costs + 2 years living expenses.
- ✓Don't rely on employer insurance—it ends when you leave your job, and 1-2x salary is rarely sufficient. Get your own policy you control.
- ✓Consider trauma insurance alongside life insurance—it pays out on diagnosis of serious illness (heart attack, cancer, stroke) while you're still alive.
- ✓Review coverage every 3-5 years or after major life events—marriage, children, mortgage increase, income growth all require coverage adjustments.
- ✓Include income protection insurance if you're the main earner—it pays 75% of your income if illness or injury prevents you from working.
Choosing the Wrong Excess to Save Money
The Mistake:
Selecting an extremely high excess to reduce premiums without considering whether you could actually afford to pay it when making a claim. The opposite mistake—choosing zero or very low excess—means overpaying on premiums for small potential savings.
Why It's Costly:
An excess you can't afford defeats the purpose of insurance. If you've chosen a $2,500 excess to save $400/year on premiums but don't have $2,500 in savings, you can't make a claim when you need to. Conversely, a $0 excess might cost $600/year more than a $1,000 excess—it would take 10+ years of claims to justify the extra cost.
The ideal excess balances premium savings with your financial capacity. Increasing excess from $500 to $1,000 typically saves 15-20% on premiums, while going from $1,000 to $2,000 saves another 10-15%. But beyond $2,000, savings diminish while your out-of-pocket risk keeps increasing.
Real Example: A couple chose $3,000 excess on their home insurance to save $650/year. When a storm damaged their roof requiring $15,000 in repairs, they didn't have $3,000 for the excess. They paid for temporary repairs themselves ($2,000) and delayed the proper fix for 8 months until they'd saved enough, causing additional water damage ($4,500) that wouldn't have occurred with immediate repairs.
How to Avoid It:
- ✓Set your excess at an amount you can comfortably pay from savings without financial stress—this is typically $500-$1,500 for most NZ households.
- ✓Calculate the break-even point—if $1,000 excess saves $300/year vs $500 excess, it takes 2 years to break even on the $500 difference. Worth it if you claim infrequently.
- ✓Build an emergency fund equal to your excess before increasing it to save on premiums—this ensures you can always afford to claim.
- ✓Consider different excesses for different policies—higher excess for car insurance (you can defer repairs) but lower for home (repairs can't wait).
- ✓Review excess levels annually as your financial situation changes—increase it as your savings grow, or reduce it if finances tighten.
Cancelling Travel Insurance to Save $100-$200
The Mistake:
Skipping travel insurance to save a relatively small amount, or assuming your credit card travel insurance provides adequate coverage for international trips. Many Kiwis also make the mistake of not reading policy exclusions and assuming everything is covered.
Why It's Costly:
Medical emergencies overseas can cost hundreds of thousands of dollars. A week in a US hospital can exceed $200,000, while medical evacuation from Asia or the Pacific can cost $80,000-$150,000. Trip cancellations due to illness or emergencies can mean losing $5,000-$15,000 in non-refundable bookings.
Credit card travel insurance often has significant limitations: maximum trip lengths of 30-60 days, coverage only if you paid for the entire trip with that card, pre-existing condition exclusions, and low medical coverage limits ($1-2 million vs comprehensive policies' $10+ million). Many Kiwis discover these limitations only when trying to claim.
Real Example: An Auckland family saved $180 by skipping travel insurance for their US holiday. Their son broke his leg skiing in Colorado, requiring surgery and 5 days hospitalization. Total cost: $127,000. They're still making monthly payments three years later, and it's affected their credit rating and ability to buy a home.
How to Avoid It:
- ✓Never travel internationally without insurance—budget for it as part of your trip cost, typically 3-5% of total trip value.
- ✓Ensure medical coverage of at least $10 million for US/Canada/Europe trips, and $5 million minimum for Asia/Pacific destinations.
- ✓Review credit card policy documents carefully—most provide only basic cover. For comprehensive protection, purchase a dedicated travel insurance policy.
- ✓Declare all pre-existing medical conditions—most policies can cover them for a small additional premium, but failing to declare voids coverage.
- ✓Consider annual multi-trip policies if you travel 2+ times per year—they cost 20-30% more than single trip but cover unlimited trips, saving money for frequent travelers.
Not Reading Policy Documents and Exclusions
The Mistake:
Accepting policies without reading the full policy document, relying instead on marketing materials or verbal assurances from sales staff. Most Kiwis only read their policy when making a claim, discovering exclusions and limitations too late.
Why It's Costly:
Policy exclusions can render your insurance worthless for the exact scenario you assumed was covered. Common exclusions that surprise people include: gradual damage (wear and tear), intentional acts by household members, damage while property unoccupied for 60+ days, and specific high-value items without separate specification.
Marketing materials highlight what's covered but rarely emphasize what's excluded. Sales conversations focus on benefits, premiums, and getting you to sign up. The critical details—conditions, limitations, sub-limits, waiting periods—are buried in the policy document that most people never read.
Real Example: A homeowner assumed their contents insurance covered their $15,000 engagement ring. When it was stolen, they discovered their policy had a $5,000 limit for jewelry unless separately specified. They received only $5,000, losing $10,000 because they hadn't read the sub-limits section in their policy.
How to Avoid It:
- ✓Read the full policy document when it arrives, paying special attention to the "Exclusions," "Conditions," and "Definitions" sections.
- ✓Create a summary of key exclusions and limits for each policy and keep it accessible—you'll refer to it when situations arise.
- ✓Ask specific "What if" questions before purchasing: "What if my home is unoccupied for 3 months?" "What if a family member causes damage?" Get answers in writing.
- ✓Check sub-limits for specific items—most policies limit coverage for jewelry, electronics, bikes, and tools to $2,000-$5,000 unless specified separately.
- ✓Challenge unclear terms before accepting the policy—if something is ambiguous or confusing, get clarification in writing from your insurer.
Letting Business Insurance Lapse or Never Getting It
The Mistake:
Small business owners and self-employed Kiwis operating without proper business insurance—public liability, professional indemnity, business interruption—or letting policies lapse during tough financial periods to save money.
Why It's Costly:
A single lawsuit, major client complaint, or business interruption event can bankrupt an uninsured business. Public liability claims average $85,000 in New Zealand, while professional indemnity claims for service businesses average $45,000-$120,000. Business interruption from fire or natural disasters can result in months of lost income with ongoing expenses.
Many business owners mistakenly believe their home and contents insurance covers business equipment and liability—it doesn't. Others think they're too small to need insurance, but client lawsuits, accidents on your premises, or data breaches affect businesses of all sizes. Some incorrectly assume ACC covers everything—it only covers personal injury, not property damage or liability.
Real Example: A Christchurch marketing consultant without professional indemnity insurance gave a client incorrect advice on a campaign, costing the client $180,000 in losses. The client sued successfully. The consultant lost their business, personal savings, and had to sell their home to settle the judgment.
How to Avoid It:
- ✓Get public liability insurance from day one—typically $400-$800/year for $1-2 million cover, essential for any business with customer interactions.
- ✓Professional indemnity is non-negotiable for service businesses—consultants, advisers, contractors need this protection against claims of negligent advice.
- ✓Business interruption insurance protects income if you can't operate—covers ongoing costs and lost revenue for 3-12 months after insured events.
- ✓Insure business equipment, stock, and premises separately from personal insurance—home policies exclude business use and commercial property.
- ✓Don't let insurance lapse during financial difficulties—this is precisely when you need protection most. Consider reducing coverage rather than cancelling entirely.
Quick Reference: 10 Mistakes Summary
| # | Mistake | Potential Cost | Quick Fix |
|---|---|---|---|
| 1 | Not comparing quotes annually | $800-$2,000/year | Set calendar reminder to compare |
| 2 | Underinsuring home & contents | $50,000-$300,000 | Use rebuild calculator, review annually |
| 3 | Ignoring NZ disaster risks | $100,000-$650,000 | Add earthquake/flood cover above EQC |
| 4 | Delaying health insurance | $40,000+ lifetime | Join by age 30 before conditions develop |
| 5 | Not disclosing information | Entire claim denied | Disclose everything, keep records |
| 6 | Inadequate life insurance | Family financial ruin | Cover 8-10x income + mortgage |
| 7 | Wrong excess amount | $500-$5,000 | Set excess you can afford from savings |
| 8 | Skipping travel insurance | $50,000-$200,000 | Never travel internationally uninsured |
| 9 | Not reading policy documents | Varies widely | Read full policy, note exclusions |
| 10 | No business insurance | $45,000-$500,000 | Get liability insurance from day one |
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