Here at Imalia, we want to demystify insurance so that you are clear about how it works so that you can make better, more fully informed decisions about how you protect yourself against risk and cover yourself and your family in case the unexpected does happen.
Why Insurance Matters
Insurance matters because it gives you the opportunity to protect things that are important to you, such as your home and its contents, your car, or your business. It also offers you the opportunity to cover your health and wellbeing and to ensure that your family are taken care of if something happens to you and you can no longer provide for them. Business owners can take out insurance cover to protect assets and stock, and to provide financial help if they face legal issues.
WHAT IS GENERAL INSURANCE?
General insurance is an umbrella term that applies to the type of protection that Insurance companies provide to protect you and the things you value. These things include:
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Your health and wellbeing
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Your home, your contents & your valuables
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Your car
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You & your family when travelling
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Your business & your business activities
General insurance covers these valuable assets from the following types of risk:
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Fire, flood, storm and earthquake
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Theft
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Car accidents and personal accidents
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Travel mishaps
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Loss of income
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Disablement and death
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Legal action
There are multiple combinations and permutations of the types of risk you can purchase insurance cover for, giving you the flexibility to purchase the right type of cover for your own unique needs.
WHAT INSURERS DO
The key role of insurers is to help their policyholders manage risk efficiently through providing insurance products, and paying the claims covered by their insurance policies
WHAT IS UNDERWRITING?
Underwriting is the way an insurer works out how much to charge for each risk they cover for each person who buys an insurance policy and under what terms. When preparing a policy, insurance underwriters will calculate:
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How much they will agree to pay for a loss
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Under what circumstances they will make a payment
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How much the premium will be
Underwriting involves working out a premium that is low enough to attract a good number of buyers, and high enough so that there will be enough money in the pooled funds to pay all the claims that might be made, plus make a profit for the insurer's shareholders.
PREMIUMS EXPLAINED
The below points outline what is meant by insurance premium:
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A premium is the amount you pay an insurer for insurance cover
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It reflects what the insurer believes is the likelihood you will make a claim. It also includes an insurer’s business costs, and may also reflect the benefits of any discounts or bonuses the insurer may offer to you
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The amount you have to pay is shown in the policy schedule, which the insurer will send you when the cover has been arranged
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The final amount you pay also includes state and territory stamp duties and levies, and the Goods and Services Tax (GST). These taxes can add a significant amount to the sum the insurer requires you to pay for the policy
CALCULATING PREMIUMS
Insurers each make their own commercial decisions when deciding how much to charge each person who wants to cover certain risks for something valuable to them. For example, when you apply to insure your car for a comprehensive or a third party property policy the insurer will decide how much that particular car is worth (market value) and what risks are worth insuring. The insurer may also allow you to nominate the insured value of the vehicle.
WHY DO PREMIUM PRICES CHANGE?
Your premium is likely to change each time you renew your insurance, even if your personal circumstances don’t appear to have changed.
This is because premiums are affected by many factors, including the cost of doing business and changes to the way your risk has been assessed.
HOW CAN YOU MANAGE YOUR PREMIUMS?
Consider these tips to manage the cost of insurance:
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Increase your excess
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Lower your risk
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Talk to your insurer
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Shop around
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Ask if you qualify for any discounts
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Pay your premium annually