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Home And Contents Insurance

This post is brought to you by Understand Insurance

Insurance is a funny product. It seems like a big fat waste of money until you need it. But when you need it, it then becomes invaluable. We bought our home six years ago. Like many people, our family home is by far our largest asset. However, our mortgage is by far our largest debt.

No-one wants to think about it, but what if something were to happen to our house? Without home and contents insurance we would be left with a small (and I mean teeny tiny) block of land in Sydney’s inner west and we would still be left to pay our mortgage. Yes, no couch to sit on, no TV to watch, no clothes to wear, no house to live in but our debt would still exist and the bank would still want its monthly repayment! For us it would be nothing short of financial devastation, throwing away everything that we have worked so hard for. Not to mention the stress and strain on our family would be unimaginable. That is why we have home and contents insurance.

However, recently when our home and contents insurance bill came in, I wondered if we had enough? You see, even if you have home and contents insurance, you cannot just set and forget, insuring for the same amount year in year out. Things change and the last thing you want is to get yourself in a situation where you need your insurance, but find out you do not have enough.

So how do you figure out how much home and contents insurance is enough? This is how I went about it …

Firstly, I split my home insurance and contents insurance into two separate decisions. Even though they are often bundled together, they are two separate things. Home insurance, covers loss or damage to the building you own. Contents insurance covers costs associated with loss or damage to your possessions.

How much home insurance do I need?

If we ever needed to rebuild our house there is more to it than just getting a pile of bricks and tiles and shoving them together. There are lots of costs involved, some of which you might not think about. Things such as the cost of clearing the land, alternative accommodation, architects fees (if needed) and fees for lodging plans to council. The costs really add up fast!

We used an online calculator to see whether our current level of insurance was roughly appropriate. It was pretty easy, they just ask you a few questions about your house and it gives you an estimate of how much it might cost to rebuild. (Click here to use the building calculator from Understand Insurance.)

The good news was the amount we are currently insured for was about right according to the Understand Insurance calculator 🙂 Happy days! (Note: if you live in a high risk area such as a bushfire prone region, you might want to talk to the council and see if you are affected by new building codes should you need to rebuild.  This might increase your costs.)

How much contents insurance do I need?

Like most families we have a lot of contents!! Lots of it we probably don’t need. Anyway, for this component we went from room to room and wrote down what we would have to replace if something happened. Beds, couches, the TV, computers (yep, in a bloggy/gamer household we have more than one, it prevents fights!), clothes, the fridge, washing machine, dryer – the list was a bit endless!!! Then we simply estimated how much it would cost to replace all our major items on the list. It is surprising how much it adds up!!! To make the process even easier, you could use a household inventory check list such as the one from Understand Insurance.  Click here to see their inventory check list. This is the way I will be doing it from now on :-).

Another way to check how much your contents should be insured for is to use a contents calculator. Click here to see the one from Understand Insurance. We checked what the contents calculator told us, against our estimate and they were pretty similar. Happy days!

After using the above methods and having a good logical think about it all, I am pretty comfortable that we are adequately insured, should the worst case scenario happen. Now the key is not to just ‘set and forget’ our home and contents insurance. But to regularly review it and make sure we are correctly insured. As one day, we might just need it.

 

This sponsored post is brought to you by Understand Insurance – a financial literacy initiative of the Insurance Council of Australia, the representative body of the general insurance industry. To find out more about insurance and to use their calculators, visit their website here.

If you liked this post you might also like:

How to save on your health insurance

5 websites that will make or save you money

How to pay off your mortgage faster

3 easy ways to find your lost superannuation

Disclaimer:

The information contained in this post is general in nature and does not constitute financial advice.  Please see your financial advisor for advice specific to your individual circumstances.

 

03/09/2014 38 comments
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Save Health Insurance

Last week I spent some time trying to figure out whether we had the best deal on our private health insurance.  You see, we have been with the same insurer for 10 or so years and they have been great, but recently I have begun to wonder whether our health insurance might be a place where we could save some cash.  The truth is this process wasn’t easy.  In fact I can safely say that a couple of hours in and the whole ‘health insurance’ scene was doing my head in!!!  However, in amongst the talk of excesses, hospital choices, government rebates, blah blah  I did figure out quite a few things.  So here they are to help you make your health insurance journey far more pleasant than mine J

(1)   Figure Out What Cover You Have Now And How Much You Pay For It

This is the best place to start, you can’t compare something unless you know what you have already.  So I looked at what type of hospital cover we have, noting what was covered and what is not.  I looked closely at our extras cover and what was included.  Then I found out how much our excess was.  This is how much we would have to pay if we had a hospital stay.  Once you have had a hospital stay and paid the excess you don’t have to pay it for subsequent visits in that calendar year (for my health company).   The last thing you need to know is how much you are paying, and whether that includes the government rebate.  (To figure out whether you qualify for the rebate and how you can have it paid click here).

(2)   Figure Out What Features Are Important To You

On the hospital cover ask yourself a stack of questions about what you need.  For example are you thinking of having a child/more children/IVF?  What family history do you have that might need to be covered for?  Do you need extras?  In our case when we decided our family was done we downgraded from what I call ‘baby coverage’ and this saved us a stack of dosh.  If you only take one thing from this post make sure you check your level of cover is appropriate, as it can give you big savings.  In term of extras the most important features I decided for us were optical and dental.  Yes, both the hubby and I are ‘four eyes’ and let’s just say the hubster spends a fair bit of time at the dentist.  The rest we use marginally so if one has better physio than another I decided that it shouldn’t really sway me.  Choosing two services to focus on really helped as it narrowed my focus down.

(3)   How Much Excess Can You Afford To Pay

The way it works is the higher your excess the lower the cost of health insurance.  However, having a high excess is useless if you can’t afford to pay it when you need to access the services.  So choose an excess that is manageable for you.  We went for a high excess as we have the cash in an emergency fund to pay for it if we needed it.

(4)   Find Out If You Have A Loading Under Life Time Health Cover

If you take out hospital cover as part of your health insurance after your 30th birthday you will you will pay a 2% loading on top of your premium for every year you are aged over 30.  The loading lasts for 10 years.  My husband didn’t start cover until he was 32 so he has a 4% loading until he is 42.  To find out more about the loading click here.

(5)   Start Comparing Health Insurance Policies

Ok, this is the tricky bit as it is hard to know what is out there.  Remember to keep the focus on the features that are most important to you.  I started by using a government site (click here) and seeing what policies they suggested.  Next I used a commercial comparison site.  These are good for finding out what is out there, but a word of warning be prepared to be harassed!!  I put in my details and an hour later they were calling.  When I ignored it they called again and again.  When I finally spoke to the guy he was helpful but I did feel pressured to make a decision so I cracked out the old “I will have to talk to my husband” so I could have time to think.  At the end of the daykeep in mind that they are trying to sell you something, so don’t be rushed into a decision.  Also each comparison site does not have access to every health fund so it might not necessarily give you the best deal.  That said, my guy was really helpful and even told me that my current provider gave me the best optical extras.  So comparison sites can certainly be helpful and definitely helped me on my journey to figure this out.

So what happened in the end?  After much contemplation and hair pulling-out we have decided to stick to our current health fund.  However, if you ever choose to change it is pretty easy and you don’t have to re-serve waiting periods as long as you are moving to the same level of cover or lower.  So it is always worth checking if you can get a better deal!  🙂

If you liked this post you might also like:

Home & Contents Insurance: How Do You Know If You Have Enough?

How To Pay Off Your Mortgage Faster

5 Websites That Will Help You Make Or Save Money

Does Shopping At Aldi Save You Money?

How To Create A Budget

 

Disclaimer:

The information contained in this post is general in nature and does not constitute financial advice.  Please see your financial advisor for advice specific to your individual circumstances.

 

24/07/2014 18 comments
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Financial tips for parents

Let’s face it parenthood changes everything.  From your social life to your ability to go to the bathroom in peace.  Things are no longer just about you and your partner, there are other considerations that must be made.  With parenthood also comes extra financial responsibility, there are extra costs and quite often less income coming in the door as one partner stays home or changes to part time work.

So here are five financial tips that you need to know now you are a parent:

  1. You should make sure you have a Will. I know you don’t want to think about it, but a Will is crucial in making sure that your children are well looked after should anything happen to you, your partner or both of you.  It gives you the ability to say how your assets will be distributed and even who should have custody of your children should the worst case scenario occur.  If you have complicated family relations then a Will is even more crucial to ensure that your wishes are clear.  A Will doesn’t have to be expensive, you can get a Will kit from your local newsagents, do it online or do it through your solicitor (definitely worth the money if your affairs are complex).  If you already have a Will make sure it is updated to account for any changes in circumstance such as additional children or divorce.
  2. You should consider Life Insurance.  If it would be difficult for your partner to raise your children without your income, then you should have life insurance.  The same is true if you couldn’t afford to raise your children without your partners income, then you need life insurance on your partner.  Without trying to sound like a bad daytime TV ad, life insurance will give you peace of mind.  If you already have life insurance, you must check it and make sure it is enough now you have children.
  3. Get rid of your credit card debt.  There are several things the banks won’t tell you about your credit card.  Number one is that credit card debt is crazy expensive.  Generally speaking the banks charge you about 19% on your credit card, compared to official interest rates of 2.75%!  Secondly, if you pay the minimum repayment it will take you an eternity to get rid of it.  Just check your statement.  The banks now have to tell you how long it will take to pay off your balance at the minimum repayment.  Last time I checked mine, it was 64 years and 7 months!  The only way to use a credit card is to pay it off every single month.  If you can’t do this then cut it up and ramp up repayments to pay the debt down.  Please click here to see my top tips for getting rid of your credit card debt.
  4. Make sure you have an emergency fund saved.  You should aim to have six months of after tax income saved to ensure that you have the confidence to deal with any bumps in the road that life might bring like another baby or losing your job.  My mother always told me that when financial problems walk in the door love flies out the window.  Having an emergency fund helps to relieve financial stress when things inevitably do not go to plan.
  5. Be aware of the huge tax rates that can be charged on savings in your child’s name.  Most people don’t know this but investing directly in your child’s name is unlikely to be the most tax effective way of saving for your child.  This is due to tough penalty taxes for minors.  The penalty tax is applied to “unearned income”, that is money the child has not worked for and includes income such as interest, share dividends and distributions from trusts.  If you invest under your child’s name, the first $417 of unearned income is tax free but after that tax is charged at 66%!  Any unearned income after $1,308 is taxed at 45%!  Ouch! (Click here to see my full post on tax rates applied to children’s investments)

Parenthood changes everything.  I hope these tips help to better navigate the financial responsibilities that come along with it.

If you liked this post you might also like to read:

How To Teach Your Children About Money

3 Things You Really Should Know When Saving And Investing for Your Children

How To Pay Off Your Mortgage Faster

How To Boost Your Superannuation Balance While You’re A Stay At Home Mum

* Please note this is for your general information only and does not constitute financial advice.  Please see a financial planner or accountant to get advice specific to your individual needs.

20/08/2013 37 comments
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