Exclusions explained

When an underwriter thinks a specific part of your history makes a claim materially more likely, but the rest of the risk is ordinary, it can accept you at standard rates and simply remove that piece from the contract. That is an exclusion. Nothing extra is charged, which makes it look like the painless option, and for some conditions it genuinely is.

The problem is that an exclusion is precisely targeted at the thing your history says is most likely to happen. A person with a documented lower back problem who takes an income protection policy with a spine exclusion has bought cover for every cause of disability except the one they have already demonstrated. That is not necessarily a bad deal — the rest of the cover is real and worth having — but it should be a conscious choice, not something noticed later.

Exclusions are also the outcome most people fail to read carefully. They appear as a short paragraph in the policy schedule, in language that looks routine. Two or three extra words in that paragraph can be the difference between excluding one joint and excluding an entire body system.

Compare these, all of which are realistic ways an insurer might word an exclusion arising from the same back injury.

Where exclusions are most common

• Back and spine, following any documented injury, surgery or ongoing pain — overwhelmingly the most common exclusion on income protection.
• Knees, shoulders and other joints after an injury or reconstruction.
• Mental health, following any history of depression, anxiety, counselling or related medication — very common on income protection and trauma.
• Named activities — motorcycling, scuba diving, aviation, motorsport, climbing — usually on life and TPD cover.

Can an exclusion be removed

Less easily than a loading, but it is not impossible. Insurers will occasionally review an exclusion after a long, well-documented period with no recurrence, no treatment and no time off work. The bar is high because the insurer is being asked to add risk to a contract it already priced without it.

1. 1Wait for a meaningful clear period — commonly several years with no consultations, no treatment and no symptoms.
2. 2Collect the evidence: GP notes covering the clear period, and where relevant a specialist opinion that the condition is resolved.
3. 3Have your adviser request a review of the exclusion in writing.
4. 4Expect the insurer to say no more often than yes. If it does, ask what would change its mind and when to ask again.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• The exact scope of the words used, and whether they extend to conditions “arising from” or “related to” the named one.
• Whether the exclusion applies across all benefits or only to one — a mental health exclusion on income protection does not necessarily touch your life cover.
• Whether the exclusion is time-limited. Some are stated to fall away after a set number of claim-free years.
• Whether an alternative was available — a loading instead of the exclusion — and whether you were offered the choice.
• Whether a competing insurer would write the same history without an exclusion, which only a market comparison answers.

Every New Zealand insurer writes policies with exclusions to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Exclusion wording is negotiable more often than people think, and an adviser knows which underwriters will narrow a clause on request.
• An adviser can obtain indicative wordings from several insurers before you commit, so you can see whose exclusion is narrowest.
• Splitting benefits between insurers sometimes avoids an exclusion on the benefit that matters most.
• Years later, an adviser is the person who runs the review request and keeps the evidence pack in order.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.