Ideally an insurance policy should provide cover which suits your needs at a price you can afford. However, you should avoid buying insurance based on cost alone as you could be disappointed when you want to claim - either with the cover or the service the insurance company can provide.

As a general rule you should:
Identify the type of cover you want, the level of cover you require (sum insured/area based), any special requirements you may have (e.g. special cover for collections, etc.) and what you can afford to pay for that cover. The cover provided by different policies considerably. If you know what cover you require you can save a lot of time and effort if you look only at policies which equal or better your requirements.

Replacement, area based policies allow for fluctuations and increases in the cost of building materials over time. If you already have insurance but want to review it's adequacy, ask your insurer about the level of your existing cover and details of any revised policies or discounts. It is also sensible to review the levels of excess that will apply to any claims you might make. Often you can afford wider cover by taking advantage of discounts such as those available if you pay more of the loss yourself (this is called a voluntary excess).

Always ensure you are receiving quotes on a "like for like" basis. If you are quoted a premium substantially cheaper than what you are paying now or than you have been quoted elsewhere, it is possible that you will not be receiving the same cover. For example, some companies use sum insured that is 'inclusive of GST' while others are 'exclusive of GST'.

Ensure that you are comfortable with the financial strength of the company that underwrites your policy. One way to do this is to check whether the insurance company belongs to the Insurance Council of New Zealand/Australia. This is a voluntary organisation to which most insurers belong. The Council requires its members to comply with a code of practice in dealing with their clients and to maintain a minimum level of financial strength. If your insurance company is not a member of the Insurance Council it may be because they are not strong enough financially to qualify.

Make sure your insurance company is a member of the Insurance and Savings Ombudsman scheme. If your insurer is a member of this scheme then in the event of a dispute, which cannot be resolved with the insurance company, you have the right to take your grievance to the Ombudsman for a ruling.

Having established which companies have policies that can provide the cover you want at a price you can afford, you should then look at the level of service and any added benefits they provide.

If you are looking to change companies consider giving the insurance company a call and ask them what they can do to help you specifically. Also talk directly with friends or acquaintances and ask how their experience has been with a company.

To come... - Making the Most of Your Financial Portfolio - Making Claim Time painless

Daniel Green & David Harrison