How to be Prepared and Ready for Anything
Sam from St Kilda is an elderly resident in his 60s. One fateful summer’s evening he was out watering his pot plants, when suddenly a car careered through his gate, running him over and breaking his leg.
Unlike many pensioners his age, Sam is still employed as a television personality and thus was fortunate to be able to meet the medical costs.
Yet most of us aren’t highly paid media identities able to shell out thousands in the event of a disaster – then again few of us have partners half our age that are in the habit of running us over using our own European sports car as a weapon.
NOTE: While much of the information below is still relevant, there’s a more recent version of this post which you can find here.
Prepare for the unfortunate
Still, as any good insurance salesman will convince you, there’s a high probability that at some stage an unfortunate – and costly – event will set you back.
Perhaps you will crash your car, or be conned into buying tickets to a Nickelback concert, or maybe your home will be burgled.
When the unthinkable does happen if you don’t have insurance you are risking financial ruin.
Consider the possibilities
Sadly, despite what the contents of your bathroom cabinet might indicate, three Panadols and a box of Band-Aids are not an effective insurance policy.
Although many people spend a lot of time thinking about making and spending money, few spare any time for insurance. The reason is that insurance is about as compelling as going to a Nickelback concert. It makes us think about all the unpleasant things that could happen.
Some insurance agents prey on this fear and in the process convince people to take out unnecessary (and expensive) cover we don’t need.
The fundamentals of insurance
The basics of insurance are this. Throughout time people have been getting themselves into all sorts of bother. Most people don’t have money set aside to pay for the ramifications, and therefore like to pass on the financial risk to someone else – usually an insurance company.
For shouldering this risk you pay the insurer a premium, which covers you against a particular event occurring that is in your policy.
choose to pay an initial amount towards your costs (known as an excess). In doing so, the insurance company will usually lower your premium, since it won’t have to bother doing all the paperwork for a little claim.
According to the Sun newspaper in London, songbird Jennifer Lopez has insured her physical assets for a cool $1 billion, although it’s not known whether her insurance excess increases at the same rate as her backside.
Insurance companies offer all sorts of policies for everything imaginable happening. Shane Warne has apparently insured his winning, spinning fingers.
Stick to the basics
Insurance is the only thing we buy that we hope we’ll never have to use. That being the case, it’s wise to get insurance only for those events that can financially maim you.
For most of us that means car insurance (if you’ve got a car), health insurance (if you’ve got a body), and home and/or contents insurance (if you’ve got a home and possessions).
Most people have basic life insurance cover included in their superannuation.
Unless you have dependants there’s not an urgent need to shell out your hard-earned to ensure your dog is cared for when you’re dead.
Car insurance
Most people’s first experience with insurance is their car.
There are three main types: compulsory third party, third party property (which can include fire and theft provisions), and comprehensive.
The cars I’ve owned in the past have been worth less than what some people spend on a round of drinks at a nightclub, so I’ve always stuck with compulsory third party.
Everyone who owns a car should have this as a minimum, as it covers you against damage your car inflicts on other people and their property.
A recent survey by SGIC showed that more than one in five motorists don’t believe that speeding increases their chances of being involved in a collision. With that in mind, people with expensive wheels should consider going up the insurance food chain and getting more comprehensive (and expensive) cover for their vehicles.
Health insurance
The second form of insurance you should look into is health.
Australia has one of the best hospital systems in the world in Medicare, which is paid for by our taxes. There are advantages, however, to being a private health patient.
In most cases, there’s no waiting list for hospital procedures, and you have a choice of where you want to be treated and by whom.
I think the cost is well worth it for the peace of mind it delivers.
House and contents insurance
The final form of insurance that you should ensure you have is house and contents.
According to AMP, 70 per cent of Australian homes are underinsured and one in four houses has none.
Perhaps your place isn’t exactly the Taj Mahal. Yet imagine coming home from work and seeing your house on fire. All you have left is the clothes on your back.
How much would it cost to replace everything you had?
The figure for even the most basic of houses can run into the tens of thousands of dollars. At about $250 for contents cover and $500 for building insurance, you’d be absolutely crazy not to get this insurance.
We’ve all seen the damage cyclone Larry inflicted on Queensland. Experts predict insurance claims will run into the hundreds of millions.
When shopping for insurance it’s often a good idea to go through an insurance broker. They can tell you what your policy covers you for, and more importantly what it doesn’t.
Pranging your pride and joy, falling ill or getting robbed are stressful experiences in themselves.
When disaster strikes the last thing you want to worry about is how you’re going to finance your misfortune.
Tread your own path!
However — and this is important — you should always seek independent financial advice before acting, especially when it comes to insurance. This is one area where it’s worth paying for it to be done right.
