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Avoiding Insurance You Donít Need

While Australians struggle with rising prices, the insurance industry is booming. In the 2004-05 fiscal year, insurance companies increased their profit by 30%. So how do you go about taking some of that profit back from the insurance company and putting it in your pocket? It's simple-make sure you're not over-insured.

It's easy these days to take on insurance that you don't really need. Perhaps you over-estimated your needs, or you didn't read the fine print on your policy. In any case, here are five simple steps you can take to avoid paying out more than you truly need to insurance companies.

1) Review your policies every year. There are things that may change throughout the year that you're still paying to cover. For example, with home insurance, you may have sold items that reduce the amount of money you need to claim in the event of a total loss. With your health insurance policy you may have changed needs as well. For example, perhaps your children have reached the age where they are no longer covered. Or perhaps you qualify for a package that excludes services you won't need until you're much older, like cataract surgery. These little changes can add up to a considerable savings.

2) Review new package schemes carefully. Insurance companies often offer packages of insurance directed toward certain groups of people. This can be beneficial because the packaging takes out the confusing and frustrating aspects of finding a policy that covers your individual needs. Unfortunately, packages can also insure you for items that you don't need covered, resulting in unnecessary cost. To make sure you end up with the right options, read the fine print offered in the package. Review what's covered and what's excluded to make an informed decision before signing on the dotted line.

3) Assess involved risk. Because insurance companies make their money by insuring the risk you or your business presents, you can decrease how much you pay them by assessing risk in the first place. For example, if you own wish to own a small business, consider renting in an area that's flood-free so you don't have to purchase flood insurance. By modifying or, in this case, eliminating the risk completely, you avoid paying premiums on another insurance policy.

4) Be clear about your needs. Knowing what you need for insurance will help you to get the policy that is right for you without saddling you with coverage you don't need. If you own a small business, knowing the amount you need to be insured for will help avoid over-insuring. It's important to know how much you'll need to rebuild in the event of total loss, how much liability you'll need, and what policies you'll need to cover the excesses.

Seek professional advice. Insurance policies can be confusing and frustrating. There are so many different policies that cover one aspect but not another that it's easy to see how someone could be over-insured. If you're confused, don't be afraid to seek out someone that knows the business. An insurance broker is someone that has direct contact with many insurance companies offering the policies that you need. The broker will be able to take your needs to the companies and then compare and contrast the different policies to find the best policy at the cheapest price, without all the extra cover you'll never use.

Submitted by:

Morgan Slater

SEIA (http://www.seia.com.au) has a collection of useful articles designed to help you better understand insurance. SEIA also contains a directory of insurance companies in Australia.




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