More than four in five Australians are risking their homes and other valuable assets by not having enough insurance. A staggering 23 per cent of all homeowners and renters have no contents insurance at all. And 83 per cent of Australians believe they would be worse off in the event of a crisis because their insurance would leave them significantly out of pocket. The consequences of being inadequately insured may be much more dire for retirees, who often have a limited capacity to recover financially, writes Rob Whelan, Executive Director and CEO, Insurance Council of Australia.
These statistics highlight how important it is to understand your insurance policies and your requirements. The research is a key plank of Understand Insurance – understandinsurance.com.au – a national consumer financial literacy initiative that helps Australians through the through the insurance process, from understanding their risks and possible insurance needs to comparing and purchasing policies and making a claim. So what can retirees do to financially protect their key assets, usually their home and its contents and their car?
STEP 1: KNOW YOUR RISKS
Life is inherently risky. While it is impossible to protect yourself against every potential risk you face, it makes sense to protect things that are important to you as best you can. Managing your risk involves a little bit of thought and planning to identify where you might be vulnerable to loss or damage. Your own risk will be a combination of your circumstances, property or asset type, its value and often its location.
STEP 2: REVIEW YOUR EXISTING POLICIES
It’s sensible to regularly review your current policies and Product Disclosure Statements (PDS) carefully to see what risks are covered and what is excluded. Every insurer’s policies are different, including inclusions and exclusions, limits on certain types of claims and excesses that may apply.
For instance, consider the risks your property faces and whether your insurance policy covers those risks. You may live in a high crime area, or close to bush land that could be vulnerable to fire. Perhaps you live in the tropics, where cyclones are common, or near a river or creek that is prone to flooding. Contact your insurer if you need more information. Though insurance can play an important role in helping you manage your financial risk should something go wrong, it is still your responsibility to protect your property and minimise your risks by taking all the steps you can to make sure any potential preventable risk has been covered.
STEP 3: AVOID UNDERINSURANCE
Underinsurance is a key issue affecting all retirees who have insurance policies. Research for Understand Insurance reveals far too many Australians don’t properly value their assets, and choose their insurance policy based on price rather than the most suitable coverage.
To avoid underinsurance:
- Check your cover regularly – review the sum you have insured in your home and contents policies when you renew them
- Find out the cost of rebuilding your property by asking a builder or valuer. Consider other expenses such as demolition, debris removal and architectural, engineering and council costs. Building costs and standards change, and complying with new regulations and standards may add to the cost of rebuilding – ask your local council
- After renovating or when upgrading household items, consider whether you still have enough insurance cover
- Use home and contents calculators (available free on the Understand Insurance website) as guides to work how much cover you may need
- Carry out a room-by-room inventory of your assets – how much would it cost to replace these with new items? Compare this with your sum insured. An inventory may also be useful if you need to make a claim
- List expensive items separately on your contents policy. Most policies have limits on individual items
- Read your paperwork and make sure you understand the insurance product you have chosen
- Contact your insurer if you have questions about your policy
STEP 4: COMPARE POLICIES
Preparing for retirement can be challenging, particularly if you decide to move to a new area, buy a smaller home or move into a retirement village. Many insurers offer policies specifically designed for retirees, but it pays to shop around and compare policies, specifically on what is included and excluded in a policy. Keep in mind that buying insurance on price alone can be risky. Cheap policies may not have the features and inclusions you may actually require.
Here are some tips:
- Shop around. Do your own research and choose an insurance policy that best suits your needs and circumstances. There are more than 120 insurance companies operating in Australia that provide competitive products and prices in most areas of general insurance. And insurers have a variety of contact points for consumers,such as branch networks, agents, online sales and call centres – choose the one that suits you best. The ICA’s free Find an Insurer service can help you find an insurer to insure your home and contents as well as other insurance such as travel, motor vehicle, trailer or caravan – www.findaninsurer.com.au
- Speak to your insurer. You may be able to achieve better premiums simply by contacting your insurer and discussing your existing policy
- Check for discounts. Ask your insurer about any discounts if you are insuring your new house and contents or renewing your policies – many insurers offer discounts for seniors, online discounts for completing your policies online or multiple-policy discounts if you combine your home and contents policies with your car insurance. Ask them about no claims bonuses too
- Buying into a retirement village? You may not have to worry about home insurance as that cost may be covered by the retirement village – check with your village manager.
The Yabsley Family
Robin and Jonne Yabsley retired to Bribie Island, Queensland, after 40 years working in Canberra. They often drive to Brisbane to visit their daughter and young granddaughter.
In 2012 they were involved in a collision 5km from their daughter Kim’s home that forced them off the road and causing thousands of dollars of damage.
They were quite shaken so their daughter handled the initial call to their insurer. Robin and Jonne were able to recover from their ordeal while Kim and the insurance company took care of all the details.
Robin said: “Our dealings with our insurer were really quite painless and although our daughter is the one that took the initial carriage for us, it was really good to know that our car was ready to be picked up the next day from our daughter’s place.”
The following day the Yabsleys were contacted by an assessor, who informed them their vehicle would be repaired under their policy. They were quickly back on the road.
Robin’s insurance tip – Anybody that drives a motor vehicle should have comprehensive car insurance. This particular incident proved how invaluable it is. Watch the Yabsley video on Understand Insurance :
“Managing your risk involves a little bit of thought and planning to identify where you might be vulnerable to loss or damage.”
- Moving into an aged care centre? Make sure you check the centre’s insurance policy to see what’s covered
- Contact a broker. Brokers can help if you are looking at several forms of insurance or have less common insurance requirements. Visit www.needabroker.com.au
- Visit Understand Insurance – www.understandinsurance.com.au – this guides Australians through the process of understanding their risks, buying general insurance, finding the right policy, ensuring they have enough coverage, controlling their costs and making a claim
- Living in a strata building? Check what’s covered by strata insurance with your strata manager. Strata owners can take steps to manage their premiums, such as accepting higher excesses on claims or using an insurance broker to find the most appropriate policy
STEP 5: MANAGE YOUR POLICY
Retired Australians can take practical steps to help reduce their risk, which may have flow-on benefits in the form of lower premiums. For example, adding window and door locks, installing a back-to-base alarm and panic buttons, or letting your insurer know you have a good driving record – insurers may take any of these into account when calculating their premiums. You may be able to choose to pay a higher excess to reduce your premiums – talk to your insurer for more information.
NEED TO MAKE A CLAIM?
Insurers pay more than 97 per cent of the claims they receive, according to the Financial Ombudsman Service (FOS). Visit the Understand Insurance website for a step-by-step guide on the claims process, which includes what you need to do before you make a claim – www.understandinsurance.com.au/claims-explained
Though each insurance company has its own processes for handling claims, general insurance companies that are members of the Insurance Council of Australia are required to meet or exceed the standards for claims handling laid down in the General Insurance Code of Practice.
The Code describes how insurers must handle their customers, including the time it takes to handle and make decisions on claims. Compliance is monitored by the Financial Ombudsman Service.
“Retired Australians can take practical steps to help reduce their risk, which may have flow-on benefits in the form of lower premiums. ”
Executive Director and CEO of the Insurance Council of Australia ( ICA )
The ICA is the representative body of the general insurance industry in Australia, which is a significant part of the financial services industry. ICA members provide insurance products ranging from those usually purchased by individuals (such as home and contents insurance, travel insurance and motor vehicle insurance) to those purchased by small businesses and larger organisations. In November 2013, the ICA launched Understand Insurance, a national consumer financial literacy initiative that helps consumers make better, more informed decisions by demystifying insurance.
guides you in simple, easy-to-understand terms through the process of understanding your risk, buying general insurance, finding the right policy, ensuring you have enough coverage, controlling your costs and making a claim
Use the ICA’s Find an Insurer service – www.findaninsurer.com.au– to help you find an insurer to insure your home and contents. This is a free service
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