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Insurance can feel complicated, with its fine print and unfamiliar terms.
But understanding how it works can help you make confident decisions later, especially when you're travelling, driving or renting.
Think of situations like:
dropping and smashing your phone
your bike getting stolen
losing luggage on an overseas trip
accidentally damaging something in a rental
At its core, insurance helps protect financially when unexpected events occur.
What is insurance?
Insurance is a financial safety net that protects your things. It helps reduce the financial impact of events such as accidents, damages, illness or theft.
However, it doesn't automatically cover every situation. Each policy outlines what is included and what isn't. Taking the time to review the details ensures you know exactly what you're protected for.
How does insurance work?
When you take out insurance, you pay a regular fee called a premium. In return, the insurer helps to cover certain costs if something happens that's included in your policy. You are only covered while the insurance policy is active.
Insurance jargon explained
Term | Explanation |
|---|---|
Policy | The insurance contract. This document outlines details of what is covered and what isn't. |
Policy holder | You! The person who owns the insurance policy. |
Coverage | What your policy protects you against. |
Premium | The price you pay for your insurance. Usually quoted annually but can be paid monthly. |
Excess | The amount you pay out-of-pocket before the insurance kicks in. For example, if repairs cost $1,000 and your excess is $300, the insurer may cover the remaining $700. |
Claim | A request that you make to your insurer for help covering a loss after an insured event occurs. |
Limit | The maximum amount the insurer will pay per policy. You will need to cover anything above the limit. |
Exclusions | Specific events that are not covered under your insurance policy. |
Waiting period | The time you must wait before certain coverage kicks in. |
Third party | Insurance that covers damage or injury you cause to someone else or their property. |
What are some common types of insurances you can take out?
Car Insurance
Helps cover your vehicle if it is damaged or stolen. In Australia, Compulsory Third Party insurance is mandatory and covers injury to others. Comprehensive car insurance can cover damage to your vehicle and other people's property.
Home and/or Contents Insurance
Protects your property and belongings from events such as fire or theft. Home (or building) insurance protects the structure while contents insurance protects whats inside.
Health Insurance
Helps cover certain medical and hospital expenses not covered under Medicare.
Travel Insurance
Can help cover unexpected events while traveling such as medical emergencies, lost luggage, cancelled flights and even rental car damage.
The information on this website is general advice only and does not take into account your individual objectives, financial situation or needs ("your personal circumstances"). Before using this advice to decide whether to purchase a product, you should consider your personal circumstances and the relevant Product Disclosure Statement. The Product Disclosure Statement and Target Market Determinations are available from Disclosure Documents page.
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