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Know your insurances - From the files of Budget Advice

April 30, 2010
By Sjors Brouwer, Family Service Centre, 27 Talbot Street, 03 528 0234

As a budget advisor I regularly come across people who are under insured and people who are over insured. Both of these situations can cost you lots of money. The under-insured are usually people without third party on their car. An interesting case of over-insured happened this month.

I saw on "Sally's" bank statement that she is paying about $10 per month to a credit card insurer. The company will roughly pay off the outstanding amount, in case of redundancy, illness and a few other ways you can loose your income.

Interestingly enough, Sally is on the Invalids Benefit and has been so for the last 20 years. We contacted the insurance company and concluded that for the last 5 years Sally has paid about $600 for an absolutely useless product. This would have paid off most of her current balance!

We asked the company to cancel the insurance and consider a partial refund. They replied that when applying for the Mastercard Sally "used ... the tick-box option", that "important conditions and exclusions apply to Credit Card Repayment Insurance, a copy of which you can obtain from any Kiwibank branch or Kiwibank's website", and that Sally had a "a 30 Day Free Look Period to review the policy documents". Therefore the insurer "has acted in good faith" and "regret... we are unable to apply a premium refund".

What is interesting is that both the bank employee and the insurance company must have seen Sally's benefit status and did not tell her that the insurance was useless.

Some lessons to be learnt:

  1. Do not trust the salesperson to act in your interest.
  2. If you don't understand the paper you sign, don't sign it, but ask a third person for advice.
  3. Many of us, if not all of us are overpaying an insurance company somewhere.

Maybe it is time to have a look at your insurances, shop around, ask around, make some changes and save lots.

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