Insurance is a fact of life. Not quite as certain as death or taxes but one of those aspects that seems to make an appearance in everyone’s life at some point or another.
I was recently presented with my Home and Contents insurance renewal notice and was shocked (or horrified to put it better) that my premium had increased by over $415 per year since last year.
We took out full comprehensive domestic property and contents cover (including Accidental Damage cover) when we first bought this house almost 1 year ago.
It was the best cover I could find for the most competitive price because we wanted to know that the biggest purchase of our lives would be protected if the most serious mishaps should occur.
However, an extra $415 a year in premium was a tough pill to swallow.
The first thing I did was go online and search for another quote and I was presented with many home and contents products with wildly different prices.
Before I became a full time mum I worked in insurance for about 8 years for 2 different major insurers processing claims and it’s common for people to assume that all coverage is the same.
Despite this being a naïve assumption it is remarkably common and it is not until a claim is lodged that the startling realisation occurs that in fact, not everything is covered and you may be terribly underinsured.
I think the reason that so many people suffer this disappointment is that the product itself is so difficult to make sense of to begin with.
Policy wordings or Product Disclosure Statements (PDS) are so long-winded and full of fine print.
To really understand what your insurance policy covers and whether or not to buy it requires that you take the time to read through the PDS.
It’s time consuming and downright boring.
I understand; I used to do it for a living.
While many insurers offer to sell their insurance online and offer you a basic rundown of their most important benefits, it really helps to know from the start what sort of cover you need. What poses a risk to your property and what are you likely to claim for if an incident should arise?
When buying insurance I do believe it is important to know what you’re likely to claim for and if the cover you’re buying adequately provides for your needs and expectations.
If the risks to your property or belongings are mild and you’re not the type to claim for something minor then perhaps the expensive bells and whistles coverage isn’t necessary.
Then again if your belongings are of high value and accidentally damaging the Monet or dropping your crystal vase is a real possibility then paying the extra for accidental damage and extras cover may well prove essential.
Most domestic insurance products like car or domestic property offer a basic or comprehensive policy.
As the descriptions suggest, the basic or “insured events” cover only covers damage when specific defined events listed in the policy happen such as fire, storm, burglary, escape of liquid, impact etc. or in the case of third party car insurance, coverage is only extended to repair damage to other vehicles involved in an accident with you where you are at fault.
Comprehensive cover on the other hand offers more extensive coverage such as damage to your vehicle following an accident regardless of the at fault party and in the case of home insurance accidental damage/breakage/loss of your belongings at home, some offer cover for lost or damaged items away from home or in transit (under certain conditions) and additional benefits such as motor fusion and food spoilage.
Naturally the more extensive the coverage, the more the insurance costs.
I think it’s important to note as well that in general policies don’t cover damage caused by wear and tear, gradual deterioration, vermin including termite and rodent damage, deliberate damage caused by occupants of the property (unless you have some form of landlord insurance) or their guests along with a whole list of other general exclusions.
The circumstances of every claim are different as are the exclusions in every policy so it’s important to enquire with your insurer if you’ve experienced an incident and are unsure of whether or not to claim.
Never make assumptions about what your policy does or doesn’t cover.
Make the effort to read your policy wording. I know it’s hard and reading it will have you looking like…
…but you’ll have peace of mind knowing well in advance that the premiums you’re paying every month are giving you the security your property and belongings need.
As a Claims Consultant I hated having to deny claims based on my clients having purchased inadequate coverage or not understanding their policy’s limitations.
Believe me, as Claims Consultants we don’t want to deny your claims but we’re bound by the policy terms and conditions so…you should read it! Ok?
Alright, that’s second-to-last time I’ll harp on about it.
As a consumer and home owner on the other hand I’ve learned that you needn’t pay for what you don’t need.
After assessing the risks to my house and considering what I was likely to put the effort into claiming for it was clear that we were paying too much for our fancy “bells and whistles” policy.
Switching from one to the other saved me just over $800 per year in premiums.
After a year of living in my house I’ve seen it withstand 4 seasons worth of weather and I’m relieved to say that it held up well.
Even if she is over 40 years old she was built solid and between blistering 45’C heat and the recent Sydney storms which uprooted trees and brought down power lines across the city, our house remained relatively intact.
All in all the house did well and so I’m confident for now that the basic cover offered by our no frills policy will be adequate for our needs. Time will tell.
This article is by no means a substitute for professional financial advice and if you’re ever confused about your level of insurance cover regardless of the product type or are concerned that you’re paying for more than you need then I strongly recommend you contact your insurance company, broker or agent for further information.
The purpose of this post is to encourage you to consider your insurance needs when buying cover rather than simply settling for the cheapest or most expensive option and to stress, for the last time that it is important to read your Policy Disclosure Statement.
Thanks for visiting!
- Lady V