Insurance companies – if you don’t ‘get it’ then they are a minefield of confusing information!
Every Insurance company will differ greatly in what they have to offer you as a product and what they will charge you for that product. No two companies will offer exactly the same cover, so it is up to us as the customer to sift through these companies and find which is best to suit our personal or business insurance needs. The Insurance Company that your friend or neighbour uses may not be suitable for your specific circumstances. So whilst they may recommend their company as being “the best insurance company in the world” it is still up to us to make sure that their product is suitable for our needs. If you find companies that offer something similar, then they will generate different premiums – this will be based on different levels of cover, different options etc.
How are premiums calculated?
This is based on many different scenarios or considerations, one being the cost to do business. Premiums will change from year to year because these costs will change annually.
Some of these reasons are….
Home and Contents
•· Your sums insured
•· What your house is made of (brick, weatherboard, timber etc)
•· Do you want cover for items away from home (jewellery, mobile phones, laptop, musical equipment etc)
•· What types of security you have on your home
•· Are there any businesses (eg: home based businesses) nearby and what type of clientele do these businesses attract to your area or street
•· What type of claims and the cost of claims that have been made in your suburb or street
•· Susceptibility to flooding
•· Level of cover provided for different types of events
•· The age of the insured, regular or named drivers
•· The type of vehicle
•· The cost to repair your type of vehicle, eg: a BMW will cost more to repair than a KIA
•· The amount of claims and the cost of claims lodged on your specific type of vehicle (generally this is Australia wide and based on year, make and model of vehicle)
•· The amount of claims lodged in your Suburb, and some companies refine this to your Street, eg: a Suburb or Street with high traffic flow will most likely have more accidents or claims than a quieter Street
Something important to consider, in general, is how an Insurance company works…
When you pay your insurance premium, imagine it goes into a pool of money. Your insurance company needs to take money out of this pool to pay for their business costs (staff wages, general costs to run a business etc, as well as their profit). What is left is what is available to pay any claims lodged.
Do you have confidence that your insurance company has sufficient funds left in their ‘pool’ to pay your claim?
Some insurance companies, at claim time, require proof that you owned the item. A lot of people ask ‘How can I prove that I owned something that is now stolen or burnt?” An easy solution is to photograph items, scan receipts, user manuals etc and save them to a USB stick which is kept away from your home (say at the office or with family or friends). Then you can easily provide proof of ownership etc at claim time and it will certainly assist you at a potentially stressful time!
Some Insurance Companies have calculators available on their website specifically to assist in determining Home and Contents Sums Insured. For example, to rebuild your home – the calculator goes through a series of simple questions like how many bedrooms do you have, what your house is made of – brick, weatherboard, timber etc. This is a great tool to assist you in determining how much you should have your home insured for.
For contents values, a personal task that I have done is make up an excel document with all of our contents listed on it, and then I have browsed through catalogues etc to find what it would cost me to replace my contents. This has given me a base sum insured for my contents.
Insurance Companies also offer Legal Liability cover. This protects you if someone is injured on your property and you are found to be negligent or responsible. If you are a tenant in a rental property and don’t have contents insurance and someone is injured on the premises – this is your responsibility not the owners
So, if there was an incident, for example a fire and all of your possessions were destroyed, and you don’t have insurance, or you have inadequate cover…how are you going to pay to replace the necessities (fridge, washing machine, beds, clothes etc) for your family to live day to day – no insurance means you have to start from scratch! Is it really worth it?
Lyn is a stay at home wife to a spectacular husband and due to have a baby in February. She previously worked for a large Insurance Company for 3 years in their Customer Service department and is very passionate about people understanding their Insurance and getting the most out of it!