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What is Insurance? Everything You Need to Know About Personal Insurance

Mitch Ramsbotham

Financial Expert Updated on June 20, 2023

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In June 2019, nearly 55% of Australians had no private patient hospital cover. A lack of insurance could cause you a world of trouble, including bad financial situations, high out-of-pocket expenses, and mental stress. 

Find out some crucial information about the insurance industry and insurance coverage. This general advice includes common types of insurance, excess, liability, and average premiums. You’ll also learn about some of Australia’s main insurance providers.

Juliane Liebermann | Unplash

What Is Insurance? 

Insurance, including pet insurance, is an essential tool to protect the things you care about. Different insurance types, such as private insurance in New South Wales (NSW) or Queensland (QLD), help cover various unexpected costs. 

For example, private health insurance covers some of a patient’s costs for private hospital treatment. Meanwhile, workers’ compensation can protect company employees through business insurance. 

Insurance can also cover other costs. For example, health insurance might also pay for other medical services, including optical and dental procedures.

In Australia, private health insurance is one of the most common types of insurance. Private entities offer this type of insurance to help cover the patient’s costs. Health insurers also help settle medical costs that Medicare doesn’t cover. 

Once you’ve signed up for an insurance plan, your new policy determines what is covered and how much coverage you get. In Australia, different policies cover different parties. These groups include individuals, families, and companies. 

Basic Insurance Terms

Insurance premiums are the amount you pay for life insurance, home insurance, and health insurance policies every month. 

Insurance payments like those from general insurance companies might also include other costs. 

For example, a deductible is how much Aussies must pay for services such as healthcare benefits before the insurance plan begins paying. 

Meanwhile, a copayment is a fixed amount you must pay for a healthcare service. For example, after settling the health insurance deductible.

Types of Insurance 

Car Insurance

Several car insurance policy options are available from Budget Direct and other insurers that cover vehicles, such as cars, trucks, and SUVs. 

Some of the different insurance types for used and new cars include: 

Comprehensive car insurance –  for car insurance protection, including damage you’ve caused to other people’s property. You can also receive free roadside assistance, or a hire car after theft, through comprehensive insurance for cars.  

Third party property damage insurance – car insurance for damage to other people’s property that you’ve caused.  

Compulsory third party (CTP) insurance – this car cover is for any personal injuries you’ve caused as an at-fault driver. It’s available from various car insurance companies.  

Home Insurance 

Home Buildings 

Home & contents insurance can help if your home gets damaged, or you need to repair or rebuild your home after a covered incident damages or destroys your home. This cover is available from several insurance companies. 

In some home insurance plans, coverage may include window glass replacement after a storm.

If you can’t live in your house after an insurance-covered incident damages your home, some insurance companies may provide you with a temporary place to live. You’ll have a roof over your head while your home is being repaired or rebuilt. 

Home Contents 

You can also secure cover for home contents. This option guarantees that the insurance company will replace your personal belongings and household contents. 

Landlord 

This type of insurance can protect your rental property and its contents. Landlord insurance can offer protection from various incidents such as:

  • Lightning
  • Storms
  • Theft
  • Vandalism 

Single Item Insurance

This type of home insurance can protect items in your homes, such as your PC, TV, or tablet. You can provide a certain amount of coverage for these items.

Motorcycle or Scooter Insurance 

You can secure different types of insurance for these two-wheelers. For example, comprehensive motorcycle or scooter insurance often covers different things such as:

  • Collision or crash
  • Earthquake
  • Explosion 
  • Storm or flood
  • Theft or vandalism 

Comprehensive motorcycle insurance might also cover other costs such as emergency repairs,  motorcycle rental after a theft, and business insurance.

Meanwhile, third party property damage insurance covers damage you cause to another person’s vehicle or property. It can also provide coverage for damages caused by a non-insured driver at fault.

Travel Insurance

This insurance type can apply to local or overseas travel. You can also secure extra coverage as protection from the COVID-19 pandemic. 

While travelling, you might experience travel or medical emergencies. Travel insurance can offer protection in such situations.  

Travel insurance can cover different circumstances, including: 

  • Travel delays or cancellations
  • Damaged or lost luggage
  • Medical issues 

Other Vehicles 

This cover includes vehicles such as caravans, trailers, and boats. For example, on-site caravan cover might include liability coverage, emergency repairs, and temporary accommodation.   

Meanwhile, boat insurance may also include other types of cover, like accidental damage, storms, and theft. 

Business Insurance 

This insurance option can provide coverage for your company, whether it’s a small business or a large corporation.  

Business coverage can include various items, including:

Public Liability

This insurance type can help protect your business if you’re liable to pay compensation for injuries to third parties. Public liability insurance also covers damages to your company’s property. 

General Property 

This insurance covers the cost of replacing or repairing the insured property. It can include equipment and tools that are accidentally damaged. 

Commercial Motor Vehicles

This type of business insurance covers the costs that may result from events like theft or accidental damage to your company car. 

Security Insurance

This type of insurance covers Australia’s security industries. Based on their needs, security companies can best determine which types of insurance and coverage would be appropriate for their corporation. 

Various types of security insurance might be available, including:

  • Public liability
  • Product liability 
  • Business insurance
  • Public indemnity 
  • Personal accident

CTP Insurance

Compulsory third party (CTP) or CTP green slip insurance provides cover for people injured by motor vehicle accidents when the client is at fault.

What Is Excess?

Car insurance excess is any out-of-pocket expense you have to pay when making a claim with your insurance company. 

If your car gets written off, then the excess is typically deducted from your final claim payment. 

Here’s something to keep in mind: the excess applies when you or someone else covered by your insurance policy is operating a vehicle and causes an accident. 

The excess also applies to a no-fault accident when your car is damaged, or nobody can contact the at-fault party. 

If another party inflicts damage on your car or truck and they’re proven to be at fault, their insurance company will cover the full costs of the accident. You’ll have no out-of-pocket expenses.  

How Should You Choose Excess?

Most Australian insurance policies have a standard excess or voluntary excess. A standard excess applies to all claims. 

Meanwhile, you can also pick a voluntary excess, which might lower the insurance premium. This replaces the standard excess. 

Drivers can also pick from other types of non-standard excess. This can be related to factors such as the driver’s age or driving experience.

It’s possible that a voluntary excess could lower your insurance premium costs. That’s because if you have a claim, you’ll pay out less. 

There are a few factors that determine how much your total excess is. They include the situation surrounding your insurance claim and your insurance company. 

What Is Liability?

A liability is something a company or person owes and is typically a sum of money)

People settle liabilities over time by transferring economic benefits, including goods, services, or money.

Several insurance companies offer CTP or green slip cover.

CTP insurance is the only kind of auto insurance that covers the person’s legal liability if they’re at fault in an accident that injures another person. 

How Much Do Australians Pay for Insurance Premiums?

Several factors determine auto insurance premiums, including: 
  • Location
  • Age
  • Driving and claim history 
  • Car model
  • Car modifications 
  • Average kilometres per year driven 

Due to such factors, different insurance companies have varying average prices. 

It’s important to get multiple quotes, such as car insurance quotes, to get the most appropriate plan. You can shop around for a policy with the optional extras that suit your lifestyle. 

Australia’s Main Insurance Providers

Here are some of Australia’s top general insurers:
  • Allianz Australia
  • Auto & General
  • Hollard Insurance
  • Insurance Australia Group (IAG)
  • NRMA Insurance 
  • QBE Insurance
  • RACQ Insurance
  • Suncorp Insurance
  • Youi

When selecting an insurer, it’s critical to check for an Australian business number (ABN). This includes any proprietary limited company (pty ltd).

All companies offering financial services guides with life insurance products, for example, must have authorised representatives with an Australian Financial Services Licence (AFSL). 

You should also read the full details of an insurer’s code of practice and relevant product disclosure statement (PDS). These documents will indicate eligible policies, the level of cover, and any exclusions. 

Terms and Conditions (T&Cs) are also important, so it’s essential to read the full T&Cs. 

The right insurance policies can help provide a steady financial future for you and your family. The first step is to review your existing insurance policies and renew them if needed. 

Still not sure where to start, or want help securing the right insurance faster? 

That’s okay!

Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.

You can reach out to My Money Sorted to guide you for free before you seek professional advice from an insurance expert!

When you book a call with My Money Sorted, you’ll:

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✓ be matched with the right insurance expert who can help simplify your search for an insurance policy that fits your needs

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Step 1: Start off with a quick money matters session with My Money Sorted

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References

1. Australian Institute of Health and Welfare

https://www.aihw.gov.au/reports/australias-health/private-health-insurance

2. Liability

https://www.investopedia.com/terms/l/liability.asp

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