Is Cheaper Always Better? Comparing Insurance Properly
Two quotes at different prices are almost never the same cover. Before you choose on price, it is worth knowing what actually differs between them, because those differences are what decide whether a claim is paid.
Price is the last thing to compare, not the first
It is tempting to line up two quotes, pick the lower number and move on. The problem is that price is a summary of dozens of decisions (sums insured, excesses, inclusions, limits), and a cheaper premium usually means one or more of those has been dialled down.
Comparing insurance properly means comparing the cover first and the price second. Otherwise you are not comparing like with like at all.
What actually differs between two quotes
Start with the obvious levers: the sum insured, and the excess you pay on a claim. A lower premium often hides a higher excess or a lower sum insured.
Then look at the details that do not show on the front page: sub-limits (caps on specific items like glass, theft or flood), the basis of settlement (new-for-old versus indemnity, which pays depreciated value), and, for businesses, the business-interruption indemnity period, which sets how many months of lost income the policy will actually cover.
The fine print that decides a claim
Two policies can look identical on cover and still pay out very differently, because of their exclusions, conditions and warranties. A requirement to keep a particular alarm active, a flood exclusion, a condition about how stock is stored: these are where claims are won or lost.
This is the least exciting part of any quote and the most important. If you read nothing else, read what is excluded.
When cheaper ends up costing more
A policy that is cheap because it is underinsured, or because it quietly excludes your biggest risk, is not a saving. It is a cost you have deferred to the worst possible moment.
Real value is the right cover at a fair price. A broker’s job is to put quotes side by side on the same terms, so the number you are comparing actually means something.
Cover this article touches on
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Any advice on this website is general advice only and does not take into account your objectives, financial situation or needs. Before acting on it, consider whether it is appropriate for you and read the relevant Product Disclosure Statement (PDS).