Finding the right insurance policy for you

Insurance policies, along with loan contracts, are some of the most important documents that you’ll sign without reading them. But there’s a lot of information in insurance policies that you’re missing out on if you’re just comparing price with the large print. While it’s quicker, it risks leaving you without the proper insurance coverage you need while paying top dollar for the privilege.

So what should you look for in an insurance policy, and what can you probably ignore? 

Look at the discount on that one!

30% off! Save over $600 on similar policies! Insurance is rife with offers like this. But are they really the deal they say they are?

First of all, ask if the offer seems realistic. Ever been offered a dollar discount that was more than your current insurance cost you? That’s one expensive policy! And just because the discount is big, it doesn’t necessarily mean that the product is going to be better for you either. 

Don’t fall into the trap of assuming that something is better just because it costs a lot of money. There’s plenty more to consider to see how good a policy is, and while price is a factor, it’s more a justification than a proof.

Do ratings matter?

You might see stars after an insurer’s name and assume that they’re going to do right by you, but ask yourself who gave them those stars? Ever been to a bakery that hadn’t won an award for something? It’s unlikely, and worth keeping in mind when you look at insurers as well. If you’re using an insurance comparison website to check policies against each other, there’s possibly some rhyme or reason to the star system. But it’s important to make sure that you do your own homework. Assuming that someone else could know what’s best for you is a little too optimistic, especially when thousands of dollars are in the balance. So while they might be a good way to visualise some of the features of one plan compared to another, you will need to do your own checking.

While ratings may not matter, however, reviews do. It’s worth a quick online search for reviews of insurers you’re looking at before signing up. A great deal doesn’t mean much if the insurer is hard to deal with, or they make you fight for your claim.

Which fine print should I read?

Insurance policies are legal documents, and as such they have a lot of tiny writing and convoluted wording. While this is by no means an exhaustive list, here are some things you might want to check on your home insurance (whether contents only or landlord’s insurance).

1. Flood Coverage

You may assume that your policy will cover flood damage, but sometimes it’s an optional extra. How important it is will depend on where your property is located. You may be okay with flood damage not being included, but knowing what you’re covered for, or not, is important. Some insurers may refuse to cover an area as well, if the risk of flooding is high enough.

2. Fire Coverage

Most policies will cover some kind of fire damage, but the devil is really in the detail. Some policies won’t cover fires that start from appliances or fixtures that heat up as a natural part of their working (so think a toaster or a heater). 

Something else to consider is whether or not your policy covers bushfires. Most insurers in Australia will, but if you’re in a fire-prone area then it’s worth double-checking.

Also, if you’re renting your property out, make sure that your policy covers deliberate fires started by tenants. It’s worth specifically contacting the insurer to find out, as there are stories of some insurers trying refuse claims in those circumstances.

3. All the Extras

You may assume that your policy will cover flood damage, but sometimes it’s an optional extra. How important it is will depend on where your property is loYou can get some amazing policies out there, but you’ll be paying for those extras. If you’re not likely to claim damage to your laptop if you take it on holiday somewhere, then why pay for the privilege? Those extras aren’t free, so if a policy has them baked into it, chances are there’s a cheaper version without those extras available through the same insurer.

Don’t get complacent

After doing all of your research, you’ll find your dream policy and sign on the dotted line. Congratulations! You now have some peace of mind. But this isn’t the end of your insurance journey. You will need to make sure each year that your policy still reflects your wants and circumstances. For example, if you extend your property or do some renovations, you might need to increase the amount you’re covered for. Over a long enough time, inflation can also become an issue. Be aware of the ‘loyalty tax’ as well, where premiums increase with each renewal with no added cover.

The benefit of there being so many insurance policies out there is that the right one will exist for nearly everyone. But at the end of the day, only you can decide whether a policy is a good fit for your circumstances. If you aren’t willing to spend the time reading your policy closely, you’ll likely be overpaying. Even worse, you’ll be paying for features that you don’t even know you have, while also being exposed to exclusions you didn’t know about. So while it’s boring, before you sign, make yourself a cuppa and sit down with the policy fine print. You’ll be glad that you did.

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