Insurance policies in essence are designed to protect you from major financial loss as result of something unfortuitous happening to you or your property.

If you make a claim, the maximum an insurer will pay you is the amount of money, or 'sum insured', in your policy. That sum has to cover everything.

Yet many people only find out they don't have enough insurance when it's too late.

• Do you have enough insurance?
  
• How do you get the best cover for what you need?

How much cover do you need?

Most people underestimate the value of what they own and under-insure. If you under-insure, you won't get enough money to cover the total cost of your loss. For example, the 'sum insured' for your home or business must be enough to cover all your costs if your home or business were destroyed, including rubbish removal, alternative housing, and rebuilding costs. You can always ask a builder or valuer to give you a realistic estimate.

Under-insurance can hurt in another way. Suppose you insure your home or business contents for $10,000, but they're really worth $20,000. Your insurer may be allowed under your policy to pay only part of any loss or damage because you have insured your property for only part of what it's worth. (this does not apply to home buildings and home contents policies so long as you have insured for no less than 80%, for example $16,000 insurance on $20,000 worth of contents.)

Every insurance policy is different in what is covered and how it's covered. Go through what the policy covers and what it excludes with a fine-tooth comb. Many people find out only too late that something was not covered. Insurance covers only what's defined in the policy and nothing else. An expensive insurance policy does not necessarily mean that you will get more cover than a less expensive policy. If you have special and/or complex needs, seek expert advice before you take out insurance cover.

You may save on insurance premiums by agreeing to pay an 'excess'. For example, if you can afford to pay for the first $500 of damage to your home or contents, you may get a reduced premium. Packaging several insurance policies with one insurer may save money alternatively, by taking out insurance with an insurer which specialises in the area of insurance you require may also save you money and result in a better, more specialised service and policy cover for your needs.