insurance

risk management

  • Risk management should consider personal (such as your health), property (such as your car) and liability (including accidental damage you may do to others) risk.
  • An insurance policy is a financial product that helps to manage risk.

how insurance works

  • Insurance policies are composed of covers and exclusions.
  • Insurance agencies can afford to provide their policy by charging a premium.
  • Individuals can potentially save money on their premiums, by agreeing to self-insure part of the risk, through an excess feature.
  • The policy may make payment in a lump sum or instalments to the policy beneficiaries. Usually the beneficiary is the policy-holder but often it can be the family of the deceased (life insurance) or someone injured in a car accident (compulsory third party insurance).

car insurance

  • Before the wheels of your car can hit the road you require compulsory third party insurance (CTP).
  • An upgrade on CTP is third party property damage insurance, and third party fire and theft.
  • The highest form of vehicle cover in Australia is comprehensive car insurance.
  • Tip: you can compare a range of car insurance policies at Compare the Market & iSelect

travel insurance

  • Travel exposes you to personal, property and liability risk.
  • Policies may be single-trip or multi-trip and all their details will be set out in the PDS.
  • There also various forms of cover available ranging from basic, mid-range, and comprehensive.
  • Tip: you can compare a range of travel insurance policies at Compare Travel Insurance & Compare the Market.

health insurance

  • Medicare is a government service which provides basic medical help to everybody. However it does not cover all services and only doctors who bulk bill will provide the medical care completely subsidised by the government.
  • Private health insurance can offer further protection or choice in terms of where or how you are treated. It is generally one of hospital cover, general cover or combined.
  • Hospital cover may allow you to use private hospitals, your choice of doctor and receive surgery faster.
  • General cover covers out-of-hospital treatment while combined cover is a nominated combination of these both.
  • Tip: you can compare a range of health insurance policies at Choosi and Private Health.

home & property insurance

mortgage insurance

practical steps

Step 1

Sit down with a pen and piece of paper, or open-up a Word document on your computer. Jot down a list of key risks that you can identify, which if were to eventuate may cause you financial hardship (think of personal, property, and liability risks). Using the framework from the topic “Risk Management” – pinpoint the risks that have high probabilities of happening, and those which have the highest levels of financial impact.

 

Step 2

For each given risk you want to manage, try to pair this up with an appropriate insurance policy (refer to topics in the module for different policy types). Remember that types of insurance come with different levels of cover (e.g. basic, comprehensive) – look through the product disclosure statements to confirm the covered events, and exclusions. If you need more specialist help and guidance, then speak to an insurance broker or a financial planner. Financial planners can recommend appropriate levels of cover.

 

Step 3

Compare insurance policies using online tools (e.g. Compare The Market, iSelect). Try to find the cheapest premiums for the given level of cover that you are after. In some cases, insurance companies can offer vastly different premiums. This is because insurance underwriters (or risk analysts) can price risk very differently. Some insurance companies also specialise by demographic i.e. one company might specialise in cheap car insurance for drivers under the age of 25. Some insurance companies offer “no claims discounts” for policy holders that have a long standing track-record of making no insurance claims – this can be an important cost-saving feature.

 

Step 4

Make sure that you regularly review your ongoing insurance policies (e.g. car insurance, health insurance) to ensure that you are getting the best deal possible (e.g. 6-12 months).

 

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