How to Select an Insurance Plan

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insurance-pukekohe house and contentsSelecting an insurance plan firstly depends on the financial situation and the degree of risk the Insured believe they can financial accept before the Underwriter steps in and accepts the remainder of the  risk. This can be  managed a number of ways 1 ) by a self insurance plan or 2) by using a higher excess a or 3) by purchasing policies that are not quite as comprehensive in what they cover (less of the minor  day to day events) yet cover all the major catastrophes that would seriously cripple an Insured financially.

Businesses have a much greater degree of flexibility in developing a specific plan however the same principles apply. The greater the wealth and size of the company the greater their propensity to mange risk . However directors have a legal responsibility to shareholders to ensure they maintain and protect both the financial and  non financial assets of their company however the larger the company the lower the risk to shareholders and the argument for a degree of self insurance. the final decision will come down to a cost to benefit versus historic data to help calculate probabilities based on that past experience.

A  very simple decision model for say an individual home owner might be the insurance on their house. They might wish to purchase the most comprehensive cover and increase the standard excess from say $300 to $500. For this they might save $90 per annum. If you don’t claim much the decision model states that if your average claim period is over 3 years take the higher excess if you claim every 2 years or less then accept the higher premium with the lower excess. (If you do claim this frequently the probability that is your insurance company will eventually increase your excess and then there will be no premium deduction)

Option 2 would be 2 purchase a slightly less  comprehensive policy and save $250 to $500 per annum. Over time the savings if put aside would normally cover these incidental claims not covered by the lesser policy.

If you would like to discuss current situation and see if there are better options available for you we are happy to review your contracts; either give us a call or fill in the form on the home page and we will contact you.





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