Understanding General Insurance: Protecting You and Your Valuables
General insurance is designed to shield you and your possessions from the financial impact when things go wrong.
While insurance can’t prevent unexpected events, it ensures that if a covered incident occurs, you won’t bear the entire cost alone.
This means that if you experience a loss, you’re less likely to have to dip into your savings, liquidate investments, take out loans, or turn to family, friends, or even community and government aid—which often only provides limited help during major disasters like floods or bushfires.
Why Do People Choose Insurance?
There are four common reasons why people decide to buy insurance:
-
Protecting high-value items: To safeguard expensive possessions such as homes, vehicles, jewellery, or artwork—especially if you’ve financed these assets with a loan.
-
Covering catastrophic events: To protect against major disasters like fires, floods, cyclones, or other natural calamities.
-
Specific situations: To gain coverage for activities not included in standard policies, such as overseas travel.
-
Liability protection: To financially protect yourself if someone sues you—like if a visitor is injured on your property and claims negligence.
Safeguarding What Matters Most
When you purchase insurance, it’s important to consider what you value and how much you’re willing to invest in protecting those things should the unexpected occur.
Most people prioritize protecting their home and belongings, vehicles, or recreational assets like boats and caravans. Business owners often insure their property, stock, and cover potential legal liabilities.
Choosing the right policy means identifying what matters most to you.
Mandatory Insurance Policies
Some types of insurance are required by law. For example, when registering a vehicle, car owners must purchase motor vehicle accident personal injuries insurance to cover injury claims from third parties. Employers must contribute to their state or territory’s workers’ compensation scheme for their employees. Additionally, homebuyers with a deposit under 20% might be required by their lender to obtain Lenders Mortgage Insurance.
What Can Be Insured?
General insurance is a wise choice when the potential financial loss is significantly greater than the cost of coverage.
For something to be insurable, the risk must have a monetary value, be uncertain (meaning it might or might not happen), and you must have a direct interest in the insured item or property—you cannot insure someone else’s home, for example.
Almost anything valuable can be insured, but typically, insured items share these traits:
-
The potential loss or damage has a measurable dollar value.
-
The risk applies to many people, such as fire, theft, or vehicle accidents.
-
The insurance premium is affordable relative to the risk being covered.
