Insurance basics: what cover do you need?
A plain-English overview of the main types of insurance, how to decide what you need, and what to do if a claim goes wrong.
The short version
- Insure against losses you couldn't afford to cover yourself.
- Check what you already have, including cover inside your super.
- Answer the insurer's questions honestly and carefully.
- If a claim is refused, complain to the insurer first, then AFCA for free.
Insurance can feel like paying for something you hope you’ll never use. But when something big goes wrong, the right cover can stop a bad day from becoming a financial disaster.
What insurance is for
Insurance works by pooling. Lots of people pay a small amount (a premium), and the money pays for the few who have a big loss.
A simple rule: insure against things you couldn’t afford to pay for yourself. A cracked phone screen is annoying. Losing your income for a year, or your house burning down, could be life-changing.
The main types of insurance
| Type | What it covers |
|---|---|
| Life (death) cover | A lump sum to your family if you die |
| Total and permanent disability (TPD) | A lump sum if you can never work again |
| Trauma (critical illness) | A lump sum if you have a serious illness, like cancer or a heart attack |
| Income protection | Regular payments if you can’t work for a while due to illness or injury |
| Home and contents | Damage to or loss of your home and belongings |
| Car | Damage you cause to others, and to your own car |
| Health | Private hospital treatment and extras like dental |
| Travel | Medical bills, cancellations and lost bags overseas |
Life, TPD, trauma and income protection are often called “personal insurance”. You can buy them directly, through an adviser, or through your super fund.
Working out what you need
Everyone’s needs are different. Think about:
- Who relies on you? A partner, kids or ageing parents.
- What debts do you have? Especially a mortgage.
- How long could you live on savings? Weeks, months or years?
- What do you already have? Check your super fund, your employer and any existing policies.
Your needs change over time. A single renter in their twenties needs different cover from a parent with a mortgage.
Understanding the price
Premiums depend on things like your age, health, job, the amount of cover and the excess (or waiting period).
- Stepped premiums start lower and usually rise each year as you get older.
- Level premiums start higher but are designed to rise more slowly over time.
- Excess: the amount you pay towards a claim. A higher excess usually means a lower premium.
Shop around and read the product disclosure statement (PDS) to see what’s covered and what isn’t. The cheapest policy may leave out things you need.
Be honest when you apply
When you apply for most personal and general insurance, you have a legal duty to take reasonable care not to make a misrepresentation. In plain terms: answer the insurer’s questions truthfully and carefully.
If you get it wrong, the insurer may be able to reduce a claim or cancel the policy. Check your health and lifestyle answers before you submit.
Making a claim or complaint
Making a claim
If you need to claim:
- Contact your insurer as soon as you can.
- Keep records: photos, receipts, medical reports and notes of every call.
- Ask what documents they need and how long it should take.
- Get the decision in writing, with reasons.
If something goes wrong
If you’re unhappy with a decision or the service, complain to the insurer first. Ask for their internal complaints process. Many insurers say they aim to give you a final answer within 30 days.
If you’re still unhappy, you can take your complaint to the Australian Financial Complaints Authority (AFCA). It’s free and independent. Time limits apply, so don’t wait too long.
Where to get free help
- AFCA: 1800 931 678 or https://www.afca.org.au
- Financial Rights Legal Centre (Insurance Law Service): free legal advice about insurance problems, 1300 663 464.
- Moneysmart: https://moneysmart.gov.au
Work out your numbers
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Sources and further reading
General information only. This video doesn't take into account your objectives, financial situation or needs. Figures are for 2026–27 and can change. Check the official sources above.