Insurance Types Defined

If you're like most Australians, you probably own all types of insurance. Health, car, life, travel and even home insurance (only to mention a few). Although you may own them, you might not understand what each one entails. Don't fret because we're here to help. In this brief article, we will provide you with a comprehensive description of various types of insurance and discuss some very important terminology associated with each type. After reading this article, you'll have a better understanding of the insurance industry and your policy. So, get comfortable and get ready to learn!

Car/Automobile Insurance: Car/Automobile is basically insurance that combines both physical damage coverage and liability insurance for claims arising out of owning or utilizing a vehicle. There are various types of automobile insurance including collision insurance, bodily injury, comprehensive, medical payments (no fault), and uninsured motorist.

  • Collision insurance protects insured against physical damage to their vehicle caused by overturning it or hitting another vehicle or object.
  • Bodily injury provides protection if you injure or kill someone while driving or operating your car.
  • Comprehensive coverage protects against physical damage to your vehicle caused from non-collision or overturn damage (theft, fire, vandalism, etc).
  • Medical payments or no fault pays the medical expenses of the injured driver and passengers and also if you're an injured pedestrian.
  • Uninsured motorist coverage protects you and your passengers against damage caused by motorist that would be legally obligated to pay but have no insurance.

Earthquake Insurance: Insurance that specifically protects your home and possessions against earthquakes.

Flood Insurance: Flood insurance is a specific type of insurance that provides coverage for flood damage. It is provided through insurance companies that participate in the National Flood Insurance Program (NFIP), a partnership between the Federal Emergency Management Agency (FEMA) and the private insurance industry. It offers protection from the home and personal belonging related to flood damage. Most people purchase this type of insurance because they live in a flood hazard area or want protection that basic homeowner policies do not offer.

Hazardous Sports Policy: This policy provides coverage for medical expenses from engaging in potentially hazardous activities like scuba diving, bungee jumping, rock climbing, etc.

Homeowner's Insurance/Policy: A homeowner's policy combines hazard insurance with personal liability insurance (due to negligence) and provides a legal defense in the amount of the purchased policy. There are several types of basic policies including H0-1, H0-2, H0-3, H0-4, H0-5 and H0-6.

  • H0-1 is basic homeowner's policy which covers your house and possessions against 11 different perils).
  • H0-2 (broad homeowner's policy which covers your house and possessions against 17 different perils.
  • H0-3 (special homeowner's policy, covers all perils except those specifically excluded by your policy,
  • H0-4 (renter's policy which covers 17 perils and includes liability coverage. It doesn't insure the home itself.
  • H0-5 is an extensive homeowner's policy which covers damage from everything except earthquakes, floods and wars.
  • H0-6 provides personal property coverage, liability and specific coverage of improvements to the owner's unit.

Life Insurance: Insurance that provides coverage for an individual's life and is paid to a beneficiary at the time of the insured's death. There are various types of life insurance including whole life, variable.

  • Accidental death provides coverage that is equal to the face value of the policy upon your accidental death.
  • Whole life insurance provides coverage for a person's whole life instead of for a specific time.
  • Variable life insurance provides payments based on the insured's investments' performance.

Liability Insurance: This insurance provides compensation to others for damage to their property or their person after it is found that you're legally responsibility for such damage.

Travel Insurance:  Specific insurance that provides coverage for emergencies while traveling including illness, baggage loss, and accidental death/dismemberment. It may also include trip cancellation refunds.

In conclusion, there are several types of insurance available to consumers. Each one provides different types of protection. Before choosing your next policy, evaluate you and your family's needs and make a sophisticated policy decision that takes these needs into account. 

Additional Reading:
Questions To Ask Your Insurance Broker

Six Golden Rules to Lowering Insurance Premiums

Avoiding Insurance You Don't Need

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