Protect yourself: Prepare for the unexpected

Step 1: Review and compare your car insurance options

If your car is damaged in an accident, stolen or written off, the financial consequences could be disastrous. That’s why choosing the right car insurance policy is so important.

Types of car insurance

Compulsory Third Party (CTP) Insurance is mandatory for every registered driver in Australia, but there are also three optional types of car insurance available:

• Comprehensive car insurance. covers the cost of repairing or replacing your car when it’s damaged in an accident or due to fire, hail, theft, vandalism and more. It also covers you when you damage someone else’s vehicle or property.
• Third party fire and theft cover. protects you if your car is stolen or damaged by fire, and also includes liability cover if your car damages someone else’s vehicle or property. It offers a lower level of protection than comprehensive car insurance and is therefore cheaper.
• Third party property cover. provides protection if you damage another person’s vehicle or property, so if you run into the back of an Audi you won’t be paying the repair costs out of your own pocket. This is the cheapest of these three options, but please note that it only covers the expense of repairing damage to the other driver’s car, not your own.

How to compare car insurance policies

1. Check what’s covered and what’s not

Read over your car insurance product disclosure statement (PDS) to check:

• What’s covered and what limits apply
• The excess (this is the amount you’ll have to pay when you make a claim)
• Whether the policy offers new-for-old replacement if your car is written off
• The list of exclusions for details of when your policy won’t provide any cover, such as if your car was being driven while unroadworthy

2. Work out how much cover you need

To make sure you choose the right level of cover, ask yourself:

• What level of cover am I comfortable with? Do you want complete peace of mind or just cover for the bare necessities?
• How much am I willing to pay? Cost should never be your only consideration when buying car insurance, but it’s undoubtedly an important one.

3. Save on your car insurance

There are heaps of ways you can lower your car insurance premiums, so keep the following tips in mind when choosing a policy:

• Shop around. Don’t just pay your annual car insurance renewal without thinking. Compare your options and find out whether other insurers can offer you a better deal.
• Look for discounts. Car insurance providers offer all manner of discounts to entice new customers, such as:

• Loyalty discounts for repeat customers
• Multi-policy discounts
• Online discounts when you buy your policy over the Internet
• Promo codes and coupons that allow you to save even further

• Vary your excess. Selecting a higher excess means you’ll get a lower premium.
• Restrict drivers. You’ll receive cheaper premiums if the drivers covered under your policy are restricted by age, for example people aged 25 and over.
• Choose a “pay as you drive” policy. Some insurers will reward you with cheaper premiums if you don’t drive your car all that often.
• Pay your yearly premium upfront. Drivers who pay their yearly premium in advance rather than paying monthly can receive cheaper cover.

Step 2: Review and compare your home insurance options

Your home is much more than just a roof over your head; it’s also the most expensive possession you will ever own. Making sure that your home (and everything in it) is protected is a vital responsibility for every homeowner, which is where home and contents insurance comes in.

Types of home insurance

• Building insurance. Building insurance provides cover for your home and other fixtures on your property (like sheds and fences) against fire, storm damage, flood, theft, vandalism and a whole lot more.
• Contents insurance. Contents insurance covers the possessions inside your home, including everything from furniture and electrical appliances to carpets and curtains. You’re protected against a broad range of events including storms, fire, theft, flood and more, while some insurers also offer accidental damage cover.
• Home and contents insurance. Combine the above two policies together and you get home and contents insurance, which offers protection for both your building and possessions in one comprehensive package.
• Renters insurance. This is a form of contents insurance designed specifically for renters and you can choose from comprehensive cover or policies that protect against fire and theft.
• Landlord insurance. Landlord insurance covers all the same risks and events as an ordinary home insurance policy, but also includes cover for things like unpaid rent and theft or malicious damage to your rental property by tenants.

How to find a better home insurance deal

1. Work out how much cover you need

According to data from the Insurance Council of Australia, 83% of Australian homeowners and renters are underinsured. To be sure of having enough cover in place, consider the following:

• How much would it cost to completely rebuild your home?
• What would it cost to replace all your worldly possessions?

Unfortunately, working out exactly how much home insurance cover you need can be difficult. Many insurers offer online calculators to help you get a ballpark figure, but an independent valuation will be more accurate.

2. Compare policies

Check your current home insurance PDS to find out what is and isn’t covered by your policy. You can then compare it against policies from a range of other insurers. Factors to consider include:

• Your own needs and situation. Do you want an affordable policy that covers a few essential risks, or do you want comprehensive cover for complete peace of mind?
• Total-replacement vs sum-insured cover. If your home insurance policy offers sum-insured cover, this means you’re covered up to a set limit you select when you purchase a policy. Total-replacement policies have higher premiums, but they cover all the expenses involved in rebuilding your property to the same standard it was before an event occurred.
• New-for-old contents cover. Some contents insurance policies only provide cover for the replacement value of stolen or damaged items, so It’s a good idea to look for a policy that offers new-for-old contents replacement instead.
• What’s covered. What risks and events does each policy cover? Are there any additional options you can include to tailor cover to suit your needs?
• What’s not covered. Check the policy exclusions to find out when no cover is available. For example, did you know that many policies don’t include flood cover as a standard feature?
• Cost. Get quotes from multiple providers to find out who offers the best value for money.
• How to claim. If you do need to make a claim, is the claims process simple and straightforward? Is 24/7 support available if you need help filing your claim?

3. Save on home insurance

There are plenty of easy ways to lower your home insurance premiums, such as:

• Shop around. No matter how convenient it may be, don’t just renew your insurance policy automatically. Compare your options and see what else is available.
• Choose a higher excess. If your insurer allows you to vary your excess, opting for a higher excess will result in lower premiums.
• Keep an eye out for discounts. Does your insurer offer loyalty discounts, online discounts, or cheaper premiums to customers who hold multiple policies with them?
• Secure your home. Check with your insurer to find out how much you’ll be able to save by increasing the security measures in place at your home, such as putting security screens on all doors.
• Pay premiums annually. If you pay your home insurance premiums by the month instead of in one annual lump sum, you may be paying extra for cover.

Step 3: Review and compare your health insurance options

Your car and home insurance are sorted, so now it’s time to look at your health cover options.

In Australia, there are two types of health cover:

• Medicare. Medicare is Australia’s public healthcare system that allows Australian residents to access a wide range of medical services for little or no cost. However, not all health services are subsidised by Medicare, which is why some people buy private health insurance.
• Private health insurance. Private health insurance is designed to provide you with more treatment options and cover additional services and costs not included in Medicare. However, you’ll need to cover the cost of health insurance premiums out of your own pocket.

Medicare vs private health insurance: What’s covered?

Do you need private health insurance?

This is a question tens of thousands of Australians ask themselves every year, but the answer is entirely up to you. Some people see private health cover as an unnecessary expense (why pay for treatment when it’s available for free?) while others wouldn’t live without it.

In short, it all comes down to your own health needs, your financial circumstances and how much control you want to have over your treatment. However, there are a few key reasons why you might want to consider taking out private health cover:

• You can choose your doctor and hospital
• You can avoid public hospital waiting lists
• Taking out cover could help you save on tax (thanks to the Medicare Levy Surcharge, which is designed to encourage high-income earners to take out hospital cover)
• If you’re getting to an age where you’re more likely to suffer serious illness, private health cover offers increased peace of mind
• If you make regular trips to the dentist, physio or other out-of-hospital services, extras cover could be a good choice

Take our quiz to find out whether you might benefit from health insurance.

What types of private health insurance are available?

• Hospital cover. This type of policy covers the cost of hospital procedures and accommodation, allowing you to receive treatment as a private patient and choose your doctor.
• Extras cover. Sometimes called ancillary or general treatment cover, extras policies are designed to help you pay for out-of-hospital health services like dental, physio, optical, chiropractic and natural therapies.
• Combined hospital and extras cover. You can take out standalone hospital cover or standalone extras cover, or combine the two together into a comprehensive package.
• Ambulance cover. Some health funds also offer standalone ambulance cover policies.

How to compare health insurance

Read the fine print closely and consider the following factors when comparing policies:

• Excess and co-payments. The excess is the amount you’ll have to pay whenever you’re admitted to hospital or treated as an outpatient, while a co-payment is a daily amount you’ll need to pay while in hospital for the services you receive. Amounts vary between individual hospital cover policies.
• Waiting periods. When you sign up for health insurance or switch policies, you’ll have to serve a waiting period. The government has limits on waiting periods for hospital treatment, but general treatment waiting periods are set by individual health funds.
• Hospital agreements. Does your health fund have special agreements in place with private hospitals around Australia that could help you avoid some of the out-of-pocket expenses that you may otherwise have to pay?
• Exclusions and restrictions. Read the PDS for details of specific services that are not covered at all by your health fund, or that are only covered to a limited extent.

How to save on your health insurance

Australian health funds must charge everyone the same premium for the same level of cover, so there aren’t as many ways to save as there are when shopping for other types of insurance. However, you can get cheaper premiums by:

• Prepaying for cover before April 1, when health pting for a higher excess or co-payment
• insurance premiums rise each year
• Making sure you only pay for cover you need – if you’re nearing retirement age, you won’t need cover for obstetrics
• OPaying your premium annually in advance, or by direct debit
• Shopping around for the best dollar-for-cover value

Step 4: Review and compare your life insurance options

Finally, it’s time to consider your life insurance options. While most of us are quick to insure our cars and homes, we’re just as quick to dismiss the idea of taking out life insurance cover.

Before doing so, ask yourself the following questions:

• How would my family cope financially if I were to pass away?
• How would I and my loved ones get by if I was unable to work for several months, years or even for the rest of my life?

Life insurance is designed to secure your family’s financial future, so devote some time to working out whether you could benefit from cover.

What types of life insurance are available?

There are five main types of life insurance available in Australia:

• Life cover. Also known as term life insurance, this provides a lump sum payment if you pass away or are diagnosed with a terminal illness.
• Income protection insurance. Income protection insurance provides an ongoing monthly benefit to replace up to 75% of your income if you suffer a serious illness or injury and are unable to work for an extended period of time.
• Total and Permanent Disability (TPD) insurance. TPD policies pay a lump sum benefit if you suffer a serious illness or injury that leaves you unable to work ever again.
• Trauma Insurance. Also known as critical illness insurance, these policies pay a lump sum benefit if you suffer a serious medical condition, such as cancer, heart attack or stroke.
• Funeral insurance. Funeral insurance provides a lump sum benefit to help your loved ones cover the cost of your funeral when you die.

How much cover do I need?

How much cover you need depends on the type of policy you get and your personal financial circumstances. The key thing you need to think about is how your family would cope if they could no longer rely on your income to make ends meet.

For example, how much money would they need to:

• Pay off outstanding debts, such as your home loan?
• Meet ongoing living expenses, like buying groceries and petrol?
• Cover the cost of your funeral if you were to pass away?
• Maintain their current standard of living?

You might want to seek help from an insurance broker, as well as use our life insurance calculator to get a better idea of how much cover you need.

Aren’t I covered by my super?

You might be. Many superannuation funds offer life and TPD cover to their members by default, with the premiums deducted from your super balance.

Check with your super fund to find out whether you already have some form of life insurance cover in place – if so, find out exactly how much cover you have and whether it will be enough to help your loved ones should the worst happen.

How to compare life insurance policies

Shopping for life insurance? Here are some key factors to consider when comparing policies:

• Direct or with advice. There are two options when buying life insurance:

• Buy a policy direct from the insurer, either online or over the phone. Direct policies are designed to make it quick and easy to take out cover.
• Buy a policy through an insurance advisor who can help you tailor cover to your specific needs. This process is more involved than buying direct but is designed to help you find cover that’s right for you.

• Level of cover. There is usually a minimum and maximum level of cover you can apply for with most policies.
• Benefit payment. What conditions will need to be met in order for a benefit to be paid?
• Entry and expiry ages. Within what age range can you take out cover? Also check whether your policy will expire once you reach a certain age.
• Cover increases. Can you increase your level of cover without undergoing any further medical checks or providing additional information about your health?
• Exclusions. Check the PDS for details, specific circumstances and health conditions which will not be covered.

How to save on your life insurance

These simple tips can help you lower your life insurance premiums:

• Know how much cover you need. Make sure you’re not paying any extra for cover you don’t actually need.
• Consider joint cover. A joint policy with your spouse can allow you to access premium discounts.
• Pay annually. Paying your premium annually is usually the cheapest option.
• Speak with an insurance consultant. An insurance consultant can use their knowledge of the market to compare the different cover options available and help you find a policy that’s right for you.
• Quit smoking. Life insurance premiums for smokers are two to three times more expensive than for non-smokers.
• Stay safe. Participating in dangerous pastimes (like bungee jumping) will lead to higher premiums.

Finally, make sure you regularly review your policy to ensure you have a sufficient level of protection in place. As your circumstances change, so too do your life insurance needs.

Coming up next week...

You’re almost there – only one more week to go. The final week of the finder financial bootcamp is all about staying on track and achieving your long-term goals, so make sure not to miss it!