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Chapter 1: Why is insurance important in financial planning?
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This podcast contains general financial advice only. That means it's not specific to you, your needs, goals or objectives. So don't act on the information until you've spoken with your financial advisor. You'll find our full disclosure, disclaimer and link to our financial services guide in the show notes.
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Chapter 2: What types of life insurance should you consider?
Kate Campbell, welcome to this episode of the Australian Finance Podcast.
It is gonna be our fastest episode ever, Owen.
Our fastest episode. Why, Kate? Because it's about insurance and we don't, well, you don't necessarily like talking about insurance that much.
Yeah, I think insurance is a really big topic and often needs experts involved. And so I wanted to just do a super high level overview of all the different types of insurances that we could think of off the top of our head this morning. and maybe a little bit about what they are.
And then if you're interested in each one, either let us know to do a whole episode on it or go and do some research and we'll provide all the links to learn about each of these insurances in the show notes.
Okay, so first of all, why do you need insurance? Insurance is really important because you don't want to blow yourself up. People think that insurance is just an unnecessary cost, but it's actually something for that like 5% of time or that 1% of the times when things go really bad. So it's about protecting you and keeping you in the game.
One of the things that I learned when I was studying finance is that typically what keeps poorer people poor is the inability to recover from loss. Whereas rich people can recover from losses. That's the general definition. It's not my definition, but that's generally accepted. And the way you protect yourself is by having insurance.
We're gonna talk about the different forms of that in just a moment. Just at the outset, a couple of quick things like terminology wise. When we say premium, that's the amount that you pay. So if you have $1,000 car insurance premium, that's what you have to pay. When we talk about excess, that's what you have to contribute if something goes wrong.
So if you crash your car and you have to pay $1,000, that's your excess. Waiting periods, that's the time for when you sign the insurance, how long till you can make a claim. And a claim is when you actually lodge with the insurer. Okay, Kate, now we've done those definitions. Let's get into a quick fire.
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Chapter 3: How does health insurance work in Australia?
It's on the other side of the glass. You only break into that if you really need to. But this can cover you for excess. It can cover you for medical emergencies and all the things you don't have insurance for immediately. This can be your life, I guess, what is it, life raft? So...
This is why I call it the cheapest form of insurance you'll ever get because it actually is free and it pays you interest if you put it in a high interest savings account or if you have it in your mortgage offset account if you're a homeowner, which is where I would put it. It saves you on paying interest on a mortgage.
And if you're someone that struggles having that cash put aside in a bank account because you're like, oh, I should invest it or do something. If you start to think of it as your insurance fund, maybe that might help you a little bit with leaving that money aside.
for sure. Okay, so just as a quick recap of this episode, we've talked about life, death, TBD and income protection. So those are three types of insurance that you can get inside your super fund. You can also get them outside your super fund. Income protection outside your super fund can actually be tax deductible as well. Health insurance, if you're under 30, you can consider getting insurance.
If you're over 30, it's gonna cost you a little bit more for every year you go past that. Under $90,000, you're not gonna pay the medical levy surcharge. As a single, it's $180,000 for a couple. It can help with all different things. We've got ambulance cover, look it up for what's required in your state.
We've got extras cover, which is not actually the core health insurance, but it actually is important for dental, optical, et cetera. And we've got health insurance in there, which covers you for a hospital. Car insurance, we've got three levels. We've got third party, which is bomb insurance.
We've got third party fire and theft, which covers you for the bomb and for fire and theft if your bomb gets stolen. And the third one, which is the top level of cover is comprehensive car insurance. Home and contents. Home is your building. Contents is everything that tips out. Make sure you read the T's and C's. Pet insurance is for cats and dogs and not camels.
Funeral insurance is probably not advisable unless you really think it's worth it. Do the numbers. Travel insurance. Kate's probably going to take off overseas in the next 12 months judging by the look on her face right now because we're talking about insurance. And travel insurance covers you for a lot, but make sure you read the T's and C's.
If you're on a tuk-tuk in Indonesia and you have a few beers in you, you're probably not going to be covered. WorkCover covers your work. Emergency Funds is your get out of jail free card if something goes wrong. Kate, that is insurance.
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