Understanding different types of insurance

The contents provided on this page are for informational purposes only and do not constitute financial advice. Consider your personal circumstances and objectives before making any financial decisions.

Having to file an insurance claim due to an unexpected event isn't something you'd hope for.

But being prepared for it is important! 

Different types of insurance policies can provide safety nets for a range of  emergencies and events.  In this article we’ll look at how different types of insurance work, potential scenarios for each type of insurance, and the claims you can make.

1. Car Insurance 

Did you know that drivers in NSW pay amongst the highest car insurance premiums in Australia? 

Car insurance provides financial protection in the event of accidents, damages or injuries related to your vehicle. The amount of protection you can get will depend on the type cover you choose. 

Types of covers 

There are several options of car insurance for you to consider:

  • Compulsory Third Party (CTP) Insurance/Green Slip Insurance: This insurance is typically included in your car registration cost, except in NSW where it's purchased separately. It covers compensation claims if a car accident you are involved in results in injury or death. 
  • Third Party Property Insurance: This covers damage to other people's property, including their cars, when you're at fault in an accident.
  • Third Party Property, Fire, and Theft Insurance: This insurance covers property damage and your car if it's stolen or damaged by fire.
  • Comprehensive Insurance: This comprehensive coverage includes repairs for your car and other cars involved in an accident, even if you are at fault. It also covers your car in case of theft, fire, flood, or vandalism. 

Scenarios and benefits 

Having car insurance is generally a good idea, and in most cases a requirement, so you and your finances are protected in case of any accidents. 

If you have a child under the age of 25 who uses your car, whether as a driver or someone learning how to drive, you may also want to consider checking with your insurer to see if this will cause any changes to your insurance. 

This is generally because younger drivers under the age of 25 are 60% more likely to be involved in serious accidents than fully licensed drivers aged 25-29. 

If your child under the age of 25 is involved in an accident while driving you may have to pay a hefty excess, as nearly all policies charge an extra excess for young drivers up to age 24. 

In some cases this could add up to $1500 on top of your standard excess, depending on whether they’re listed on your policy, and what type of licence they’re driving on. 

Common types of claims

  • Collision at fault 
  • Damage whilst parked
  • Theft
  • Windscreen damage.

2. Home Insurance 

When facing stressful situations like potential damage to your home, having insurance can provide much-needed relief, helping you get back on track.

Types of covers

There are 3 types of Home Insurance cover:

  1. Home and Contents Insurance: covers your house and other structures on your property as well as your belongings for loss or damage due to events like fire, theft and storms.
  2. Home Insurance: covers your house and other structures on your property, including your garden shed, fences, and in-ground swimming pool.
  3. Contents Insurance: covers the belongings inside your home, including furniture, whitegoods, electrical appliances, clothing, and more.

Scenarios and Benefits

One common scenario where home insurance might come in handy is a roof leak.

Dealing with a roof leak can be stressful, especially as it can lead to different types of problems such as mould and mildew, which can create health concerns. 

In fact, according to Finder, the top 3 events Aussies made home insurance claims for were flood, mould and portable contents! Without insurance, a minor roof repair can cost up to $1,000–$2,500, and a major roof repair can go as high as $2,500–$12,500. Having insurance can give you the flexibility to fix the issue sooner rather than later without leaving too much of a dent in your savings. 

A standard homeowner or building insurance policy covers the most common risks and dangers to your home. These may be listed as covered perils.

Common type of perils 

  • Falling trees or branches 
  • Other falling objects
  • Windstorms, hail, extreme weather conditions 
  • Weight of ice or snow
  • Vandalism
  • Accidents. 

Before signing up with an insurance company, it’s worthwhile checking what type of damage or event is not covered. For example, in the case o a  roof leak, typically if the leak was avoidable and happened due to roof neglect, the responsibility to have these fixed will lie on you as the homeowner. 

3. Travel Insurance 

In 2022, 3 in 4 Australians experienced issues with their travel plans in 2022.Travel disruptions not only can cause you great inconvenience, but may also result in unplanned expenses. This is where travel insurance can come to the rescue — it covers the financial costs when something goes wrong during a trip.

Types of covers 

When picking out a travel insurance policy, you can generally choose from: 

  • Basic/Medical-only
  • Standard
  • Comprehensive. 

There are also different types of travel insurance based on how you travel:  

  • Depending on how often you travel, you may be able to choose from: 
    • A single trip policy 
    • An annual multi-trip policy. 
  • Depending on where you plan to travel, you may be able to choose from: 
    • Domestic travel insurance. 
    • International travel insurance. 
  • Depending on who you are travelling with, you may be able to choose from:  
    • Couples insurance
    • Family insurance 
    • Group insurance. 

You can find out more about the different types of covers and levels here!

Scenarios and benefits 

The two main reasons for travel insurance include:

  • Trip cancellation: For example, if you've planned an expensive vacation, but a family emergency forces you to cancel your trip at the last minute, travel insurance can reimburse you for the non-refundable expenses, such as flights and accommodations. 
  • Medical emergency abroad: For example, if you fall ill while travelling and require medical treatment or even hospitalisation, travel insurance can cover medical expenses, including hospital bills and emergency medical evacuation. 

Common types of claims 

  • Trip Cancellation or Interruption Claims
  • Medical Expenses Claims
  • Emergency Evacuation and Repatriation Claims: 
  • Lost or Delayed Baggage Claims

To compare different types of travel insurance in Australia you can use websites like Finder or Canstar

4. Health Insurance 

For most Australians, Medicare is the main source of funding for health check-ups and appointments. So why would someone need health insurance? Health insurance works by providing you with financial coverage and access to a wider range of healthcare services, beyond what Medicare offers. 

Types of covers

There are 2 types of covers for health insurance: 

  • Hospital cover for in hospital treatment 
  • Extras’ cover, for health services such as ambulance, dental, optometry and physiotherapy. 

Scenarios and benefits

If you want to start seeing a psychologist or counsellor, these are additional costs that health insurance may be able to cover. This also includes no waiting periods, which means you could start seeing a psychologist as soon as you’re ready.  

Some health insurance policies can also give you access to therapy or counselling sessions with a psychologist without the need for a referral. 

The Australian Psychology Society (APS)  states that for a standard 46-60 minute consultation it will cost you roughly $300.  Depending on the health insurance you choose, your policy may be able to cover most or a portion of these costs.Consider double checking your coverage level to see how much you are eligible for here.

Common types of claims 

  • Dental Care such as check ups, basic fillings and cleaning.
  • Hospitalisation for things like needing a hip replacement or other procedures.
  • Medical Services 
  • Mental Health and Counselling.

Life’s full of surprises. Insurance can be one way to help reduce the impact of unexpected events. Remember to research the different types of insurance plans that work with your financial situation and lifestyle. For more help check out our blog on how to find the right insurance for you

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