General insurance fundamentals


General insurance helps people to protect themselves financially against life's uncertainties, such as natural disasters damaging their home, car theft or losing luggage while travelling overseas.

What happens to my money when I pay an insurance premium? 

When you pay an insurance premium, you are putting a specific amount of your money into a ‘pool’ that other people buying insurance also contribute to.

If an asset of yours is accidentally lost, stolen, damaged or destroyed, and you have a general insurance policy that covers that asset for those risks, you can make a claim and draw on that pool of money to help pay repair or replacement costs.

This may allow you to avoid paying the full cost of replacing, repairing, rebuilding or restoring your insured items if they are lost, stolen, damaged or destroyed. It also means you could avoid ending up with a large debt or liability.

What is underwriting?

Underwriting is how insurers work out how much to charge for each risk they cover for each person who buys an insurance policy and under what terms.

When preparing a policy, insurance underwriters calculate:

  • How much they will agree to pay for a loss
  • Under what circumstances they will make a payment
  • How much the premium will cost

Underwriters consider a number of things when working out the price of a particular risk for insurance. For example, car insurance premiums may vary depending on the age, sex and driving record of the main drivers, as well as the location, type and age of the car.

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