How do I protect my possessions and the things I love? (general insurance)

Key Points

  1.  Insurance can be used to protect against loss or damage to your possessions
  2. This type of insurance is referred to as general insurance and there are many different types available to protect different assets. Understanding the common types of insurance will help you figure out which insurance is right for you
  3.  Ensuring you protect those things that you cannot afford to live without (your home for example) is important to ensure you are not financially ruined by unexpected events

If you can think of a risk, there is probably an insurance policy out there if you are willing to pay the price. However if you tried to buy insurance to cover every possible risk you wouldn’t have any money left so it is good to understand the most common types of insurance and consider if they are relevant to you.

Insurance that is designed to protect things is often referred to as general insurance. It can cover things such as homes, cars, personal belongings.

The choice to take out insurance is a personal one and will depend on your circumstances as well as your attitude to risk though the following table can help.

Insurance Type Risk it insures When to consider it
Home building Damage or loss of a building. Note that the definition of a building does not include the contents inside
and/or some of the fixtures and fittings
  • If you own your own home. Most lenders will require this insurance as part of the terms and conditions of any lending
Home contents Damage or loss of home contents (clothes, furniture, electronics, jewelry etc) and includes some house
fixtures and fittings
  • If you own your own home. Ensure you also include fixtures and fittings
  • When you are renting you could consider covering your own possessions as the landlord’s insurance does not cover this
  • Some policies will also cover accidental damage and theft of possessions outside of your home
Landlord insurance Loss of rental income if tenants do not pay rent
  • If you have an investment property
Lenders Mortgage Insurance This insurance is often taken out by banks however the costs are passed onto the borrower. It protects the bank/lender in a situation where the borrower is unable to repay the loan and the sale of the security doesn’t cover the loan outstanding
  • This will be generally be required if you are borrowing a large proportion of the value of your home. Generally if the borrow in is greater than 80% of the value of the home
  • Lenders Mortgage Insurance is expensive so it is preferable to save a large enough deposit to avoid it if possible
Car insurance Third Party – damaged caused by your car to other people’s car or property Third Party fire and theft – as per third party but also includes theft or fire of your vehicle =Comprehensive – damage to your vehicle and other people’s property cause by your car as well as theft and fire
  • If you own a car
  • The level of car insurance will generally come down to the value of the vehicle. If the value of your vehicle is low, third party may be appropriate
  • If the value of your vehicle is higher or if a car is critical to your work or lifestyle then Comprehensive insurance may be more appropriate
Travel insurance Cost of things that can go wrong while travelling such as cancelled flights and accommodation, illness or
injury while travelling, loss or damage of personal items
Travel insurance is a bit of a hybrid as it covers both things and people (medical expeses)
  • When travelling, in particular overseas where medical costs would not be covered by other insurance you may have.
  • For more expensive or longer trips where there is a greater risk of something unexpected happening
  • If you are travelling with valuable items such as camera equipment or laptops