Insurance For Dummies

In this day and age, you can insure almost anything. And if you’re new to the insurance world, it become a little confusing and overwhelming trying to work out what all the different types of insurances are. Do you need income insurance? Home insurance? Car insurance? Life Insurance? If you need some help deciphering the basics, this guide will help you out.

Home & Contents Insurance

Home & contents insurance is where you essentially insure your house and its ‘contents,’ meaning your furniture, electronics and other valuables, to compensate you should your home or its valuables become stolen or damaged (say if there’s a break in or a fire). Most places will offer home & contents insurance together, but you can get them separately if you wish.

Car Insurance

If you are buying a car in Australia, regardless of in which state you’re in, you will need to get compulsory third party insurance. Without it, you won’t be able to register or drive your car. Third party insurance ensures that if you injure somebody else while driving, the insurance can cover some or all of that person’s medical costs and compensation.

Depending on what state you live in, you yourself may or may not be covered (i.e. you’re covered in VIC, but not NSW). You should also consider getting additional car insurance, which covers to repairs to your car and other cars should you be involved in an accident. There are lots of car insurance agencies around, so make sure you shop around for car insurance quotes to find the best deal.

Health Insurance

In Australia, Health Insurance is compulsory for any single earning over $77,000 per annum. But even if you are young and/or earning under this amount, health insurance is still be a good idea as it is a backup so that you don’t fall into debt due to arising medical problems. If you do earn over this amount and don’t get health insurance, you will need to pay the Medicare levy (basically another bunch of money) at tax time. Health cover is generally split into two areas: Hospital and Extras.

You can get them separately or bundle them both together (the latter is a better idea and usually cheaper). Hospital health insurance covers you for when you go to hospital or if you need an ambulance. Extras will cover you for expenses from the dentist, optometrist, chiropractor, physiotherapist and other medical professionals. Some health covers also cover gym fees, yoga classes and other perks, so shop around and see what you can find!

Income Protection Insurance

Income Protection insurance protects you from loss of your income. Let’s say you are injured in an accident or come down with a sudden illness (like pneumonia) and you cannot do your job or earn your usual income. Income Protection will cover a percentage of your income until you can return to work. In some cases, it may even cover you if you never become well enough to return to work. Depending on your occupation and your living situation, you will need to assess how important income protection is for you.

Mortgage Insurance

If you’re buying a house or unit, Mortgage Insurance covers you should you not be able to pay your mortgage for a short period of time (usually anywhere from 1-5 years), due to an accident, illness or temporary loss of employment. However, Mortgage Insurance will not cover you if you become critically ill (say if you become diagnosed with cancer or have a heart attack) and can never pay your mortgage ever again. If you think you are at risk of a critical illness (say if there’s a high rate of stroke in your family), you will need to chat to your insurance provider about including this extra cover in your premiums.

Life/Death Insurance

With Life Insurance, you are essentially insuring your life. This means that should you die, a lump sum payment will be paid to your dependents and your family to make sure they are still cared for. Life insurance can also be used to pay off any debts that are outstanding at the time of your death, so that these debts don’t fall on your dependents. Life Insurance is not mandatory, but can offer you peace of mind if you have a family or people that depend on you for care, such as an elderly parent or a disabled sibling.

Pet Insurance

Yes, there is such a thing! Pet Insurance covers expenses and bills involved in looking after your pets. This may seem quite trivial at first, but many people underestimate the cost of veterinary bills if their animal becomes sick or injured in an accident. Pet insurance starts at around $5 per week and like all other forms of insurance, there are lots of options out there so getting a few quotes is a good idea before you sign up to a policy.

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