Understanding and Managing Your Insurance Risks
Everyone faces different risks, and before you can effectively manage them, you need to clearly identify what they are. Your personal risk profile depends on your unique circumstances—including the type, value, and location of your property.
For example, if you live in an area prone to theft, your risk of burglary is higher. Those near bushland might be more vulnerable to bushfires, while residents in tropical regions may face cyclone threats. Living close to a river or creek could expose you to flood risks.
The good news? Australia’s general insurance market is highly competitive, with numerous insurers offering a broad range of products tailored to different needs.
Because everyone’s risks differ and people prefer to handle risk in their own way, insurance companies provide policies with varying levels of coverage, exclusions, terms, and premiums.
When shopping for insurance, it pays to explore different options to find a policy that best fits your specific risks—not just the cheapest one. Always read your policy and Product Disclosure Statement (PDS) carefully. If a risk isn’t explicitly covered, it might not be included. Understanding whether your policy only covers listed risks or has broader default coverage is crucial.
Taking Charge of Your Risk
While insurance can help cushion financial blows when things go wrong, it’s still your responsibility to protect your property and reduce risks wherever possible.
Paying an insurance premium doesn’t shift risk away completely—it compensates you if an insured event happens, assuming you’ve taken reasonable precautions to manage foreseeable risks.
Most insurance policies require policyholders to take all sensible steps to protect their property and disclose any known risks at the time of application.
For instance, homeowners should maintain their property to minimize damage risks. Overhanging trees, blocked gutters, or neglected roofs can increase vulnerability to storms or hail damage. Poor maintenance might lead to claim denials or reduced payouts.
Similarly, effective home security helps manage theft risk. Car owners should keep up with regular servicing to reduce accident risks.
How Does Risk Affect Your Insurance Premium?
Generally, higher risks lead to higher premiums. You can manage some of this cost by choosing to pay an excess—the amount you cover yourself before insurance kicks in.
A higher excess usually means a lower premium, as you’re agreeing to absorb smaller losses. Conversely, a lower or no excess results in higher premiums but less out-of-pocket expense if you claim.
Finding the right balance depends on your comfort level with managing small losses versus paying more upfront for peace of mind.
When Risks Are Too High
Some risks are considered unacceptable by insurers or attract very high premiums because the chance of loss is too great. For example, flood risks in certain Australian regions may be difficult or expensive to insure.
Risks and Exclusions
Engaging in risky behavior can void insurance claims. For example, travel insurers often exclude injuries from dangerous activities like the Running of the Bulls. Motor vehicle insurers typically won’t cover accidents caused by drink driving.
