Insurance 101: Get covered without wasting $$$
Insurance companies work because everyone chips in for access to a range of services. You still pay regardless of whether you use the services, but they’re there if you need them.
We all take steps to protect what’s precious in our life, insurance is one way to do that. It softens the blow when something does go wrong. But it’s important to make sure you’ll be able to access the right services when you need them otherwise you’ll be paying money for something you can’t use.
A lot of people don’t bother with insurance, or simply purchase the cheapest plan to avoid the daunting task of researching it. But if you understand the terms, and how to choose the right cover, it’s a worthwhile thing to do. After all, Beyoncé wouldn’t walk around without a body-guard would she?
To make the research a little easier learn these quick Need-to-know Insurance terms:
Premium= The lump sum, monthly or annual amount you pay to be covered.
General rule: the higher the risk, the higher the premium.
Excess= The amount you have to cover before you get anything back.
General rule: the higher the excess, the cheaper the policy.
Waiting Period= How long you have to wait after taking out your insurance policy before you can claim.
PDS= Product Disclosure Statement aka Policy Wording, is a long document which outlines exactly what is and isn’t covered.
Answer these questions to determine the level of cover you need:
The level of cover that’s appropriate for you depends on three factors.
- How much money you have to spend on insurance
- How likely it is something will go wrong, and
- How devastating the impact will be for you. Most insurers will have tiered levels of cover, with optional extras available for purchase at each level. When looking at the levels of cover, be realistic about what you’ll need, and how you could cover the costs yourself if your policy doesn’t. Income + Risk + Costs = Level of Insurance Needed
Mara is a perfect example – as a freelance photographer, Mara, is going on a 3-month work trip to South America. On work trips, she needs to take her expensive laptop and camera equipment. Maria has saved for the trip but has no income stream while she is there. Apart from the general consequences of travel related accidents, if Mara’s laptop or camera is stolen or broken, she’ll be unable to complete her work or earn money. Given her sporadic income, she won’t have the money to replace them for a while. Her best option is to go for a basic level of cover, and purchase options to cover her laptop and camera.
Low Income + Medium Risk + High Costs = Basic cover plus extras
The most important thing you need to do when buying insurance is to read the PDS.
Study it like you studied your Year 12 English book. Analyse it like you analyse your crush’s text messages. Attack it with a highlighter, leave no stone unturned. If wading through 30+ pages of legal jargon is as unfeasible as doing your taxes yourself, get help. Parents are excellent bull**** detectors, and your law, public service or banking friends will be skilled in reading through contracts. If you get really stuck, most insurers will have an online chat you can use. Don’t be afraid to email with questions. If they don’t reply, or are tricky to get onto, it’s a good indication of how they’ll treat you when you try to claim.
Remember: insurance contracts assume you are a model citizen who never gets drunk, does drugs, has a chronic illness, who never leaves the house unlocked or does anything risky. Basic insurance contracts are generally written so that unless you did everything humanly possible to avoid the incident, you won’t be covered.
Want more info? Get more on general insurance here: http://understandinsurance.com.au/
Once you have the basic insurances covered, if you want more info on wealth protection or life insurance (income protection, life cover, TPD and trauma insurance), complete Step 4 of the Money & Mindset 101 program.
This blog is published by Verve Superannuation Pty Ltd (ABN 65 628 675 169, AFS Representative No. 001268903), which is a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956, AFSL 238184), as the Sub-Promoter of Verve Super.
Verve Superannuation Pty Ltd and True Oak Investments Ltd are not licensed to provide personal financial advice. The information contained in this blog, including any financial guidance, is general in nature. You should consider seeking independent legal, financial, taxation or other advice to ensure that your financial decisions are suited to your unique circumstances.
You should read the Product Disclosure Statement, Additional Information Booklet, Insurance Guide, Target Market Determination and Financial Services Guide before making a decision to acquire, hold or continue to hold an interest in Verve Super. When considering financial returns, past performance is not indicative of future performance.