INSURANCE is a waste of money … until you need it.

We all hate paying insurance premiums when things are running smoothly.

But when a disaster happens, and we need to make a claim, those premiums become worth every dollar.

The trick is balance.

Having the right amount of insurance cover for your circumstances … not too much and not too little.


1. Home and car insurance

You have to adequately insure your home and your car, there's no two ways about it. It's ludicrous to pay $300,000 for a house and then not insure it … it's too bigger risk. If you can't afford to insure your house or car then you can't afford to own them.

If you want to save money contact your insurer and ask if you can reduce your house and car premiums by increasing the excess you have to pay in the event of a claim.

You may also be able to cut the amount of car insurance you pay if you restrict your cover to two nominated drivers or if you ban kids under 25 years from driving your car.

If you're shopping around for a new policy ask about savings from insuring your house and car with the same company. Your bank is a good place to start because they often do good deals for existing clients.

Some insurers also offer discounts if you buy policies online.


2. Home Contents insurance

Think about how much all your furniture, electronics, jewellery and clothes would cost to replace if they were stolen or lost in a disaster. If you have contents cover, your insurer will pick up the bill.

You may get a discount on your contents insurance if you buy it with your home insurance.

If you have an existing policy make sure your household contents cover is up to date and your most valuable items are covered. Most Australian households are under insured when it comes to contents so take some time to value everything.

Ask your insurer if you can save on both home and contents insurance by installing deadlocks, burglar alarms or smoke detectors.


3. Income protection

A family's primary breadwinner is its most important financial asset. Forget shares and property, if there's no money coming in to put food on the table or a roof over your heads you're in trouble.

A disability or income protection policy will pay up to 75 per cent of your income if you can't work due to sickness, injury or accident.

If you're struggling to fit income protection insurance into your budget, don't sacrifice the quality of the policy.


Compromise in other areas and look for the following:

• Policies with step premiums which increase according to age. These are less expensive than policies with flat premiums.

• A longer qualifying period. Instead of choosing a policy that does not pay for the first 30 days, go for one with a 45 or 60 day no-payment period.

• Shorten the benefit period. Choose a policy that will pay benefits for five years or even two years instead of one that will pay until 65. Most disabilities last two years or less.

But remember you are trading off cover for premium savings so be aware how it increases your risk.

And make sure you check the definitions in this policy as they change between companies.


4. Life insurance

Generally the closer you get to retirement age the smaller the life insurance policy you require, because your costs are lower and your superannuation lump sum is higher. If you're younger, have dependent children, large debts and not much superannuation your family will need a much bigger life insurance payout to get by. The good news is, the younger you are the cheaper the life insurance.

Look for a policy that will pay some money early if you are diagnosed with a terminal illness. The money will help cover the financial drain of specialist medical care and give you freedom to spend more time with loved ones.

Also buying cover through your superannuation fund could be cheaper.