Proper insurance is a balancing act

We all hate paying insurance premiums when things are running smoothly.

But when we need to claim, those premiums become worth every dollar.

The trick is balance.

HOME AND CAR

Home and car insurance is essential but if you want to save, ask your insurer if you can reduce premiums by increasing your excess.

Car premiums may be cut by restricting cover to two nominated drivers or banning kids under 25 from driving your car.

If you’re looking for a new policy, ask about savings from insuring your house and car with the same company. Your bank is a good place to start.

HOME CONTENTS

You may get a discount on contents insurance if you buy it with home insurance.

If you have an existing policy, make sure your household contents cover is up to date and your most valuable items are covered.

Take time to value everything. Ask your insurer if you can save by installing deadlocks, burglar alarms or smoke detectors.

INCOME PROTECTION

A family’s primary breadwinner is its most important financial asset.

Disability or income protection policies pay up to 75 per cent of your income if you can’t work due to sickness, injury or accident.

If struggling to cover the premiums, don’t sacrifice the quality of the policy.

Compromise elsewhere and look for the following:

Policies with step premiums which increase according to age. These are less expensive than policies with flat premiums.

A longer qualifying period. Instead of choosing a policy that does not pay for the first 30 days, go for a 45 or 60 day no-payment period.

Shorten the benefit period. Opt for benefits for five or even two years instead of one that will pay until 65. Most disabilities last two years or less.

But remember you are trading off cover for savings, so be aware how it increases your risk and make sure you check the definitions, as they vary between companies.

LIFE

Generally, the closer you get to retirement, the smaller the life insurance policy you require, because your costs are lower and your superannuation is higher. If you’re younger, have dependent children, large debts and not much superannuation, your family will need a much bigger life payout to get by. The good news is, the younger you are, the cheaper the cover.

Look for a policy that will pay early if you are diagnosed with a terminal illness. The money will help cover the expense of medical care and free you up to spend time with loved ones.

Buying cover through your superannuation fund may also be cheaper.