Insuring your Life, Family and Property
Insurances are a necessary expense in the modern world. Finding the right insurance policies for you and your family in Australia can be a complicated matter. Here is a guide to the various types of insurance you will need to think about as part of your relocation.
Types of Insurance
There are five main types of insurance in Australia:
- Private Health
- Home contents/personal possessions
- Motor (car)
Private Health Insurance
A private health insurance policy covers you in the event of illness or accident. People earning a high income are obligated to take out a private health insurance policy as a way of assisting the nationally funded Medicare system.
Permanent residents, Australian citizens and people from countries with reciprocal health agreements are entitled to healthcare through Medicare
. For more information, visit Daily Life: The Australian Health System
There are six principle advantages to taking out health insurance.
- If you have to have a medical procedure, a private health insurance policy allows you to choose your doctor and/or surgeon in hospital
- It allows you to choose the hospital you are admitted to
- You can have a private room
- You can claim a percentage of medical costs not covered by Medicare
- You will not have to wait so long to undergo any elective surgical procedure (non-essential surgery)
- You can set a % of the cost of private health care against your tax liability
However, health insurance may be expensive and different companies (or providers) offer different ranges of cover, so it’s important to shop around before taking out a policy. The cost of your policy will depend on a number of things:
- Existing serious medical conditions
- Whether or not you smoke
- What inclusions are in the policy
Private Health Providers (PHP) are regulated by the government of Australia according to the National Health Act (1953). There are many private health insurance companies (providers) in Australia. For more information, visit The Australian Health Directory
A helpful site for finding the right private health provider for you and your family is iSelect
Life insurance provides a fund in the event of your death. The way it works is you pay a monthly or annual premium to an authorised organisation. It invests the money so it will grow and your policy will be worth more than the sum total of your investment over the years. In the event of your death, the money is paid to your beneficiaries, as a lump sum or regular monthly or annual payments.
How Much Life Insurance Should You Have?
There are no hard and fast rules about this. It’s down to the individual and how much you wish to spend on your premium. The general idea is that you have enough life cover to protect your family in the event of your death. You should take into consideration the amount needed to pay off a mortgage, other debts and provide at least a contribution to on-going costs of living for those who survive you when determining the size of your policy.
Factors Effecting Cost of Life Insurance
This is much the same as health insurance. The cost of taking out a life insurance policy will depend on a few factors:
- Existing serious medical conditions
- Whether or not you smoke
It is important to know what is offered in your life insurance policy and to weight this up against the cost. The primary form of cover is one that pays out on the event of your death, but subdivisions of common policies include:
- Total and Permanent Disability Cover: This is a form of cover where a pay-out is made if you do not die from an accident or illness but you are permanently disabled and unable to work. It is usually worth the same as the pay-out in the event of death. If you choose to take the pay-out in monthly or annual instalments it is paid for the rest of your life.
- Trauma Cover: This is a part of life insurance which entitles the holder to a pay-out on the policy if you become sick with a serious illness or have a debilitating accident.
- Income Protection Insurance: This is designed to protect you in the event of illness or an accident that prevents you from working. It is similar to Total and Permanent Disability Cover but most insurance companies pay out a aximum of 75% of your income up to retirement age.
Ways to Obtain Cover
There are two principle ways to get life insurance.
- Life insurance companies (or banks)
- Through your superannuation (pension)
According to the Financial Services Council
, some 70% of Australians take out life insurance through their superannuation fund. In other words through the company that looks after your pension. The advantages of this are:
- It is cheaper than through an independent company.
- You will have immediate acceptance of your status.
The disadvantages are:
- Getting life insurance cover through your super will not provide the level of cover of an independent fund and may be insufficient for your needs. You will not be able to have ‘trauma insurance’ through your super.
It is important to check your pension fund policy to see how you stand over these matters.
Find out more at the Investment and Financial Services Association
Building (Property) Insurance
Insurances related to building insurance is described in detail at our article on Costs Associated with Property Purchase
Home Contents/Personal Possession Insurance
As well as thinking about insuring yourself, your family and your house, you should consider protecting your possessions. You are eligible for contents insurance if you are a homeowner or if you are renting a property.
With this form of insurance, you pay a premium based on two main factors:
- The value of possessions you wish to insure
- Where you live
If you need to make a claim, a claims assessor will judge its validity and you will be given a pay out. It is essential to read the small print of the policy. Recently, many insurance companies in Australia have come under fire for not paying out on cover because of technicalities and loopholes in the policy.
Motor (car) Insurance
One of the most dangerous things people do in life is drive a car. So, it makes sense that cars should be insured. This is to protect you and your car, but also to cover the costs of an accident you may cause.
In four states, New South Wales, Queensland, South Australia and Victoria, a form of car insurance is included as part of the cost of the annual registration of your vehicle. This is called third party insurance. It covers the costs of your liability in the event of an accident. In other words, if you cause an accident, this policy protects the other party.
In those states in which this third party cover is not included as a levy in the compulsory registration of any motor vehicle (Western Australia, ACT, Northern Territory, Tasmania), you are required by law to take out a third party insurance policy with an authorised insurance company.
You may also choose to take out comprehensive insurance on your car. This covers you for any damage to your own vehicle. If you have a new or valuable car, it would be wise to take out comprehensive insurance. If you are in an accident that is your fault, the other party or parties involved in the accident will not pay out for the damage done to your car, so the only way to protect your vehicle is by you having comprehensive insurance. This is of course more expensive than the mandatory third-party insurance.
The cost of motor insurance will depend on a number of factors:
- The type of car
- The value of the car
- Where you live
- Your age
- Your driving record - whether or not you have been involved in any accidents
- How you use your car - If you are in an ‘at risk’ profession (entertainers for example) your premium will be more expensive
- Your state of health
- Additional names on the policy - especially if they are young drivers or have a poor driving record
For advice about the in motor insurance requirements in your state, visit Money Buddy
A Final Note
Whatever the type of insurance you purchase, always check through the small print of any policy before you sign the contract. For advice on any form of insurance
, the Australian government has a good website dealing with all aspects of insurance.
Visit our Life in Australia
section for more articles related to the subject Relocating to Australia.