I understand that the point of the backpacking way of budget travel is to cut the costs.However - and a big however - travel insurance is something you should seriously consider.
There are three areas of that are important to the budget traveller - medical, luggage and cancellation.
If you are planning to have a bit of adventure on your travels, it is wise to check if your plan covers activities like parasailing, rafting, scuba diving or motorbike riding.
If you plan on being away for some time, check out annual multi-trip insurance options.
Medical Insurance
Australia operates a national health care scheme called Medicare. Because of reciprocal arrangements between Australia and Finland, Italy, Malta, the Netherlands, New Zealand, Sweden, the UK and the Republic of Ireland, citizens of these countries can also use Medicare while they are in Australia.
This means you are entitled to immediately necessary medical and public hospital treatment, although what is covered under the arrangements varies between countries.
These agreements do not replace private travel health arrangements, and it recommended that you check the agreement for your country and take out complimentary private travel insurance. Also, it may be that you need to activate the reciprocal agreement before you leave your home country.
If you are from one of the above countries and are staying in Australia for some time, apply for a Medicare card at any Medicare Centre. Medicare is the national healthcare scheme and you will need to show this card when obtaining medical treatment.
If you need to visit a doctor during your stay, take your Medicare card - you will probably be asked to pay for the consultation up-front (around $30 usually) and you will be given a detailed account. You then claim a refund from Medicare (approximately 60% of the fee) or your insurance company - so don't lose that account - for obvious reasons doctors don't like issuing copies.
However in Australia Medicare only covers doctor related costs - it does not cover ambulance or dental costs for instance. If you do need urgent dental treatment and don't have cover for that, you may be able to contact the local university dental hospital where it may be possible to get treatment from dental students.
It is important to check that your policy includes comprehensive medical and repatriation cover, and also to advise the company of any pre-existing medical conditions you may have.
Some companies prefer to pay doctors and hospitals direct - others require you to pay and to claim back from the companies later.
Luggage Insurance
Simple - you arrive but your bags don't - what are you going to do next?
Worth thinking about, even if you do have good cover. Work out strategies for spreading your documents, credit cards and some clothes so if you lose something you don't lose everything. Take some things on the plane as cabin bags - keep some things on your body at all times - and have somebody you can 'phone if all else fails.
Cancellation
When you are travelling it is always possible that things could go wrong - maybe as a result of an accident you might need to cancel the remainder of your trip, and the cost could be quite significant. And don't just buy anything - read the small print, and if you can't understand it then don't buy it.
Generally
It is important to know what your policy covers (and what it doesn't cover!) - check for instance that it includes comprehensive repatriation cover, and that the policy lasts for the duration of your trip. If you are planning on several trips or being away for some time, see if there are options for annual or multi-trip policies.
If there is any chance that you might take part in hazardous sports, check this is covered in your policy - and while you are at it, check that you and the company have the same idea of what is hazardous. Some companies consider activities such as scuba diving and bushwalking as dangerous, while most frown on bungy jumping.
It is essential that you advise the insurance company of any pre-existing medical condition you might have - it is better to tell them everything and have them say it doesn't matter than not to tell them and find that they use some obscure reason not to pay your claim. For these reasons is is good to keep a written record of what you tell them and what they say doesn't matter.
Ask your company for their emergency contact telephone numbers in Australia and write these together with the the policy number in your passport or wallet so you always have them with you.
Ask about the claims procedure - some companies want you to call a claims center in your home country for an assessment of your problem, while others have agency arrangements with Australian companies who can handle your claim immediately. In either case take care to keep all documentation.
Remember, there is no such thing as cheap insurance - just differences in what will be covered in the event of problems.