your money starter insurance factsheet 1

8/8/2019 Your Money Starter Insurance Factsheet 1

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What is insurance?

Insurance helps protect you rom fnancial loss when things go wrong. For example: yourmobilephonecouldfalloutofyourpocketandbreakwhileyouretravelling

(and you need a new one)

youmightbeinjuredinacaraccident(andyouhavetopayfortreatment

and the cost o repairs to your car).

While having insurance can give you peace o mind, its not like a savings account,

where any money you pay in belongs to you. What you can claim back rom the

insurance company depends on whats covered in your insurance policy. Italicised words

can be ound in the Glossary, Insurance Fact Sheet 8.

How does insurance work?

Depending on what you are insuring against,

the insurer agrees to pay you money to help

cover costs i that thing happens.

For example, i your laptop was stolen rom

your home, and you had insured it against thet,

you could make a claim with yourinsurerto help

cover the costs o getting a new laptop.

This is called a transer orisk because the

insurer is taking the risk o meeting the cost

o the loss. Without insurance, you are taking the

risk that you will have to wear the fnancial loss ithings go wrong.

What can you insure?

You can buy dierent types oinsurance policies

that cover a range orisks, depending on what

you are insuring.

Insurers oer policies with dierent eatures, so

make sure you choose a policy that is right or you.

What you insure Types o policies

Your holiday Travel insurance

Your property Car insurance, home insurance and contents insurance,

boat insurance

Your person Health insurance, life insurance (includingincome

protection insurance, total andpermanent disability

insurance, term life insurance and sickness or

accident insurance)

Your business Business insurance, proessional indemnity and publicliability insurance

Your loans Consumer credit insurance

What is an insurance policy?

You and the insureragree on what is being insured. This is written

in a legal agreement (contract) called an insurance policy.

The insurance policy sets out exactly:

whatisbeinginsuredandtheriskbeinginsuredagainst

(terms and conditions)

anyexclusions

howmuchtheinsurerwill pay i you make a claim

howmuchthepolicywillcostyou(premium).

Thepremium can depend on things like where you live or what you and

the insureragree will be the cost o replacing something i its stolen or

damaged. The premium is less than the total cost o what you are insuring.

How can you get insurance?

You can buy insurance directly rom the insureror rom an insurance broker.

Insurance brokers are not employed by the insurerand may be able to help

you get a better deal.

I you are thinking o buying insurance rom a broker, make sure they are

licensed by ASIC, or that they work or someone who is licensed by ASIC

(see Get on the web on page 40 or how to check).

Insurance helps pay your expenses or covers

your losses when things go wrong.

You and the insureragree on what is being

insured and how much it is being insured or.

By paying or insurance, you are transerring

the risk o having to pay i something goes

wrong to the insurer.

You can only claim on your insurance i the

thing that goes wrong is covered in your

insurance policy.

FIDO facts

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INSURANCE


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Some reasons to insure

1 Insurance can help you replace something

you own and could not aord to replace. For

example, i your home was destroyed in a fre,you would need a big lump sum to rebuild it.

2 Insurance can protect you rom something that

might not happen, but which would be bad or

you i it did. For example, i you were injured

in an accident and couldnt work anymore,

you would need money to live on.

3 Insurance can help you pay o a debt i some-

thing youve bought with a loan is damaged or

destroyed. For example, i you took out a loan

to buy a car and the car was written o in an

accident, you would need money to pay o

the loan.

Excess

Some insurance policies include an excess.

This is how much you must pay out o your

own pocket on any claim.

For example, i you have a car accident, the

total cost o repairing your car might be $2,000.

I you have an excess o $500, you would have

to pay the frst $500 and the insurerwould paythe remaining amount, $1,500.

Sometimes an excess might be compulsory

(or example, on car insurance or young drivers).

In other cases, you can choose to pay a higher

premium to reduce or remove the excess.

Generally, the higher the excess youre willing

to pay, the lower yourpremium.

Waiting period

Some insurance policies have a waiting period.

This means that you must wait or a certain periodo time ater you buy the policy beore you can

make a claim. For example, you may have to wait

12 months beore you can claim the cost o going

to the dentist or having a baby on a private health

insurance policy.

You may be able to change the waiting period

or some policies. I you choose a longerwaiting

period, you may pay a lowerpremium. You need

to decide whether you can aord to wait or your

insurance beneft.

Exclusions

Exclusions are things that arent covered by your policy. This means

that the insurerwont cover your costs i these things happen.

Value

Some insurance policies include a value (or cost) or what you are

insuring. This is based on what the insurerwill pay you i you have

to claim on your insurance:

Agreed value This means that the insurerwill pay you a fxed dollar

amount as stated in your policy. (There may be some deductions,

or example, an excess.)

Market value This means that the insurerwill pay the value o the item

based on its current age and condition at the time o loss (or example,

cars or laptop computers may lose their value quickly and the insurer

will only pay you much less than what it cost you to buy, or to buy areplacement).

Replacement cost This means that the insurerwill cover the cost

o replacing the item with a new one, regardless o its current age

and condition.

The value (or cost) you insure or can aect thepremium you pay upront.

For example, yourpremium might be cheaper i you insure ormarket value.

Claims

A claim is when you ask yourinsurerto pay or something that is covered

by yourinsurance policy. You can only claim on your insurance i the thing

that goes wrong is covered in yourinsurance policy.

When youre shopping around or insurance, look orclaim procedures

or conditions in the policy. How the insurerdeals with claims will be

important to you i you need to make a claim later on.

GET ON THE WEb

www.fdo.gov.au ollow the path: About fnancial products/

Insurance/How insurance works

www.search.asic.gov.au check that a broker is licensed

or works or someone who is licensed by ASIC

www.understandingmoney.gov.au/content/consumer/

fnancialliteracy/insurance

Smarter Insurance, a brochure published by ABA

(www.bankers.asn.au), IFSA (www.isa.com.au) and the ICA

(www.insurancecouncil.com.au )

www.fnancialbasics.org.au Module 4,Financial Protection

the key to security

40 www.fdo.gov.au/yourmoneystarter June 2008 ASIC 2008

What is insurance?fact sheet #1 : INSURANCE Page 2


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Under yourduty of

disclosure you must tell

the insurer all relevant

details you know when

you buy a policy and

when you make a claim.

Type o insurance When you might need it Why you might need it How you can get it

Travel insurance

(Reer to Fact Sheet 3 or more

ino and exclusions.)

Any time you travel or go on holidays

overseas, and or travelling within

Australia when you have expensive

items.

To cover you in case you lose your

luggage, miss your plane or train, are in

an accident or have a medical problem

travelling overseas.

Travel agent,

insurance company

or brokers.

Car insurance

(Reer to Fact Sheet 4 or more ino.)

When you own a car or when you drive

the amily car.

You have to get compulsory third party

insurance when you register your car.

Additional insurance can cover you when

youre in an accident, or i your car is

stolen, broken into, or breaks down.

Insurance companies

and some car dealers

or a broker.

Home buildings insurance

(Reer to Fact Sheet 5 or some

more ino.)

When you own your own home. To cover your home in case o fre

and other defned events.

Insurance companies

or brokers.

Contents insurance


When you move out o home,

whether youre renting or you own

your own home.

To cover your property in case o burglary,

fre, and other defned events.

Insurance companies

or brokers.

Health insurance


When youre no longer covered under

your amilys policy (i they have one).

To cover you or injury, or medical

or dental treatment.

Private health

insurance providers

or brokers.

Lie insurance


When you depend on your income

to cover bills and living expenses.

To cover you i you cant work due

to an accident or illness, or i you die.

Lie and general

insurance providers,

your super und

or brokers.

Consumer credit insurance

(Reer to Fact Sheets 4 and 6

or more ino.)

I you think you may have some

difculty in meeting some o your loan/

credit repayments.

To cover you i you cant repay some

o your loan because you are unable

to work.

Your loan or credit

card provider

or brokers.

Typical exclusions rom cover (where the insurer will not pay) Type o policy

Any illegal behaviour, such as driving while drunk Car insurance

Modifcations to your car (or example, the addition o spoilers as shown

in the Safe or sorry Insurance interactive)

Car insurance

Adventure sports such as bungee jumping, white-water rating, skiing

and scuba diving

Travel insurance

War/terrorist damage Travel insurance,

life insurance, contents

insurance

Your luggage is stolen while let unattended in a public place Travel insurance

Damagecausedbyfoods Home insurance and

contents insurance,

car insurance

Damage caused by a ailure to maintain or repair the insured property (or

example, rain gets into your house through a hole in the roo that you knew

about but didnt repair)

Car insurance, home

insurance and contents

insurance

Cosmetic surgery Health insurance

Do you need it?

This table is a guide to when you may require dierent types o insurance. There may also be other circumstances not listed here,

so always look careully at your situation and shop around or the best cover.

41www.fdo.gov.au/yourmoneystarterJune 2008 ASIC 2008

fact sheet #1 : INSURANCE Page 3What is insurance?

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