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Do you need insurance?

Do you need insurance?

Life is full of the unexpected events and, in some circumstances, insurance may be able to help. That doesn’t mean each and every type of insurance is always necessary – it will depend on your life stage and circumstances.

Before entering in to any insurance agreement it’s important to weigh up the value of what you’re insuring, the risk of something happening and also the cost of having insurance (this includes premium payments and excess payments). Start by getting an understanding of what insurances are available and whether they are suitable and financially viable for you.                   

Car insurance

Every car in Australia must be insured with Compulsory Third Party (CTP) insurance which covers death and injury to people if you have an accident. There are other levels of car insurance to consider but remember to investigate the fine print to understand monthly costs and excess:

  • Third Party Property Damage: Covers damage caused by your car to other people’s property (for example their car or fence).
  • Third Party Property Damage, Fire and Theft: Covers your car if it’s damaged by a fire or is stolen, and also provides cover for any damage done by your car to other people’s property.
  • Comprehensive: Covers damage to your car as a result of events like collision, flood, fire, storm and theft. Also covers damage done by your car to other people’s property.

Home and contents insurance

Home insurance protects you against damage to your property that is out of your control. Contents insurance covers the cost of items and possessions that are within your home should they be damaged or lost. If you own your home you can bundle these insurances together into one policy. If you’re renting you may want to consider just contents insurance, but every policy is different so make sure you understand the fine print before you decide.

Health insurance

Private health insurance can cover some hospital and medical costs that are not covered by Medicare. There is a wide range in terms of the type of costs covered and the extent to which these costs are covered so make sure any policies you consider match your lifestyle.

For people earning over a certain amount, having private health insurance can be cheaper than paying the Medicare levy surcharge.

Life insurance

If something happens to yourself or your partner it can dramatically change your family’s circumstances but there are a number of different types of insurance so make sure you understand the fine print of the policy and what is suitable and affordable for you:

  • Life cover: Pays an amount of money when you die to people nominated as beneficiaries.
  • Total and permanent disability (TPD) cover: Pays an amount of money to help cover rehabilitation and ongoing costs should you become totally and permanently disabled.
  • Trauma cover: Covers you in the event of a specified illness or injury.
  • Income protection: Covers lost income should you be unable to work because of injury or sickness.

Different insurance policies and providers have conditions around eligibility criteria so it is worth doing thorough research before you commit to an insurance policy.

What else?

Other insurances include funeral insurance, pet insurance and travel insurance. See a comprehensive list from the Australian government.

Read next: How to only spend within your income

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information.