Becoming financially independent and secure – budgeting, saving, debt and other key matters.

4f. Understanding insurances

Est. read time: 3 min

Insurance is an important part of your financial wellbeing. It can help protect you financially if you have health problems, are involved in a car accident or if your home is damaged or destroyed.

You need to review your insurance policies including car, home and contents, and life protection insurance, especially if you have children, to make sure they provide the level of cover you need. Your beneficiary nomination under your existing policy needs to be reviewed if the beneficiary is your ex-partner.

You might already have life protection insurance through your super, which you may be able to increase if it's not enough.

Types of Insurance

  • Health Insurance – Private health insurance can help you pay hospital and medical costs not covered by Medicare. If you don't have private health insurance, it can cost you a lot of money if something goes wrong and you have to undergo prolonged medical treatment. More information can be found at Private Health Insurance Ombudsman website.
  • Life Insurance – Life insurance provides the financial means to preserve your way of life, or that of your family, in the event of an accident, serious illness or even death. It can provide financial support in the event of serious accidents or medical conditions resulting in permanent injury or loss of life, sickness or temporary disability and unemployment. More information can be found at the MoneySmart Life Insurance page.
  • Car Insurance – Car insurance provides different levels of cover for your car depending on your needs. The type of cover you take out will affect the overall and ongoing cost of your vehicle. Always consider what you require and what is most suitable to your needs. More information can be found at the MoneySmart Car Insurance page.
  • Home and Contents Insurance – Home insurance (also called building insurance) covers the cost of rebuilding or repairing your home and helps protect you against things that are out of your control, such as damage from natural disasters like storms, floods and bushfires.  Contents insurance covers the personal possessions you have in your home if they are damaged or lost. It can include things like furniture, clothes, computers, fridges, electrical equipment, tools, and jewellery.More information can be found at the MoneySmart Home Insurance page.
  • Mobile phone, tablet & laptop insurance – Portable electronic devices are highly valuable but also easy to damage, misplace or steal. Insurance can be a good way to offset the cost of repair or replacement. Before you take out insurance read the fine print, as some providers do not cover accidental loss or mechanical damage. More information can be found at the MoneySmart mobile phone, tablet & laptop insurance page.
  • Pet insurance – Pet insurance usually only covers cats and dogs, but some insurers cover other animals as well. Most policies have limits on what they will pay out each year and for each condition. If your vet bills are more than the policy limit, you'll have to pay the difference. More information can be found at the MoneySmart Pet insurance page.

Always take time to research the insurance you need and the level of cover that best suits you. If you are unsure of what is suitable for you, seek help from your insurer or an insurance professional.

Choosing Insurance / renewing your insurance


Things to be aware of when considering insurance:

  • Quotes for an insurance policy are free.
  • Getting a quote should be an easy process and can be done over the phone or through the company's website.
  • Get at least three quotes on policies you have researched and thoroughly understood before choosing one. Read the fine print.
  • You should think about:
    • How much will the policy cost you in total?
    • What can you claim for?
    • Are there limits to what you can claim?
    • Is the benefit of your policy worth what you will be paying for it?
    • Be aware of any excess to be paid on a claim. This is an amount you must pay before the insurance company will pay the rest, so needs to be factored into your long term budgeting.

While you have insurance


Your insurer must inform you in writing of any changes to your policy. You must also keep your insurer informed of any changes or modifications to:

  • Your personal details e.g. name, address, phone number, email
  • The items you have insured such as car modifications, renovations, etc

If you are unsure whether or not you need to notify your insurer of the change or modification, contact your insurer directly.

Claiming on your insurance


If something bad happens that is covered by insurance, it is important that you contact your insurer promptly. After all, that's what insurance is for. See information provided by the Insurance Council of Australia for things that you should think about before making a claim.

Remember that you can contest decisions made by your insurer if you believe it has made the wrong decision. You should try to negotiate with your insurer first. If negotiation falls, ring the Financial Services Ombudsman or look up the FOS website for advice and assistance.

[Article last updated:  19/6/21]

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