How insurance works
What is insurance?
Insurance is a contract where you pay a premium and an insurer has an obligation to cover and compensate you for particular events such as losses, damage, illness or death.
There are different kinds of insurance contracts. Examples include:
Insurance contract terms
Like normal contracts, insurance contracts have terms. Some examples of insurance contract terms include:
Conditions of being covered, such as:
- having smoke alarms in your building
- making sure your vehicles are regularly serviced
- how long you’re covered before you have to renegotiate your insurance contract.
How much gets paid out to compensate you, such as:
- an agreed amount
- market value
- a percentage of a market value
How much you pay for the insurance and when, such as:
- annual payout limit
- lifetime limits
- limits per claim
- what you’re cover for.
Product disclosure statements
Under the Corporations Act 2001 (Cth), insurers have an obligation to provide a product disclosure statement that explains their insurance products, including:
- who is offering the insurance
- any contract terms
- any information reasonably expected to significantly affect their insurance products.
- Read about insurance regulations to understand the responsibilities and obligations of insurers.
- Visit APRA’s General insurance page to learn more about your insurance rights and obligations.