Insurance structure- why does it matter?

The right insurance structure, for your house, contents and your life comes down to planning.

The right insurance structure makes sure that a claim will be paid.

And getting paid on a claim is the only reason to have insurance in the first place!

Structuring your cover.

We usually get insurance ‘bit by bit’ as we think about what we need at the time. But insurance is not a thing to be guessed at.

Putting together a comprehensive insurance structure means looking at all the options and working out:

  • what is the most important to you
  • what you really have to protect
  • what you can actually afford and what you can’t
  • what you need and what you want.


Types of Cover – ‘Fire and General’ or ‘Risk’

Fire and General (known as F&G) is insurance for your possessions (house, contents,vehicle, boats etc) .

Risk (or Personal insurance) is for death, illness, accident and health.


There are different types of F&G cover available but, in general, it falls into two categories:

  • Replacement – an insurance company will replace a lost or destroyed item with a new one or repair the item, so it is as new as practically possible.
  • Indemnity – (it may also be referred to as Market Value or Present‐day Value). This puts you back in the same financial position you were before the loss occurred based on how much you would pay for the item second‐hand or the replacement cost less an allowance (depreciation) for age and use.

When you use F&G

#1: Insuring your House

Very few houses are totally destroyed – for instance, by fire or flood.

But it can happen and your home is probably the highest cost item you own.

broken house

So insuring it is wise. But over-insuring is not.

So think about the value of your house (in dollar terms, not emotional ones) and what it would cost (don’t add in the land value) to replace it if it was destroyed . That is the amount your house insurance should be.

One way of reducing the cost of property insurance is to take a bigger excess.

In the event that your home is destroyed your excess will be removed from the amount the Insurer pays but, overall, that amount will probably be insignificant in the total cost of replacement.

And, over the years, you will have saved thousand of dollars in premium.


#2: Insuring your stuff.

We value the things we own !

But apart from those things that have sentimental value (photographs, your mum’s jewellery) everything else can be replaced with newer or better!

House Robber

So again, you need to look at the value of the ‘things’ that are important to you and calculate the cost of replacing them.

You probably need to make a couple of calculations.

  1. If your house and all your possessions are destroyed what will be the cost to replace all your ‘stuff’?
  2. If your house is robbed what would be the likely cost to replace what has been stolen?

Clearly these two events will have different financial outcomes.

So deciding what your cover should be will probably be somewhere between them.

Again, look at your excess, as this can be an important factor in the actual monthly cost of your cover.


What is Risk insurance?

#3: Risk Insurance – insuring you.

This is where you decide, in the case of death or illness, what your value is, the value of your family and your lifestyle.

‘Stuff’ can be replaced but if you get broken, you are much harder to fix or replace. Insuring yourself is a major part of your insurance structure.

But while most houses (and contents, cars, boats, caravans) are insured, fewer of us consider insuring ourselves.


  • If you die how would your family cope with the financial burden?
  • If you get seriously sick who will look after you and how do you pay for it?
  • Are you prepared to wait for months (or years) to get treatment?
  • If you can’t work for an extended period how would you manage financially?
  • If you can never work again what does your future look like?
  • Without an income will you lose your home?

These are questions that are faced by ordinary Kiwis every day. Questions they never planned for.

And we can see that by the pages and pages of people that ask for help on the ‘Give A Little” website.

Sadly, most of these people did not plan ahead or ask themselves those questions.

Risk insurance can be complicated and will be based entirely upon your personal situation and what you need.

Everybody has different requirements and sometimes getting it right can be confusing. But getting the right policy is really important.


Need some advice?

Have a look at getting your Life Insurance sorted properly.

If you are unsure about your insurance structure we have a FREE e-book that outlines the 5 mistakes that most people make when getting insurance.

get the Free ebook
5 mistakes in insurance

You can also get in touch with us.

We will talk through your situation with you and provide free, no-obligation advice