(Pilot Wealth Management)
Underinsurance in Australia – How to Avoid Becoming a Statistic
Every now and then, you may notice a friend, relative or acquaintance post a fundraising plea to help out a family that lost a parent or provider, or to support the education or hospitalisation of an orphaned child left in the care of elderly grandparents. There are many kinds of such posts, and they are indicative of the fact that most Australians are underinsured and even totally uninsured.
Underinsurance refers to the gap between how much life insurance an individual or family needs and the actual amount of life insurance they hold. Even with the default life insurance cover provided through their superannuation, a lot of Australians still do not have the cover required should they need to make a claim someday.
When it comes to income protection and disability cover, even fewer Australians are insured. But why is this so and how can you avoid becoming a statistic?
Why Australians are underinsured
Although like most people Australians understand the value of insurance, they remain underinsured for the following reasons:
- The insurance-is-too-expensive mindset: People think that insurance or additional cover is an unnecessary costly expense when, in fact, being under- or uninsured is so much more difficult and expensive in the long run. What you can do to avoid this mindset is to educate yourself, shop around and compare policies.
- Lack of trust in insurers: Some people don’t believe that their insurer will be there to back them up in case a crisis hits them. They’re held back by thoughts of being denied when they make a claim.
- Inadequate knowledge and resources: People can get lost in the insurance jargon and turned off when they don’t understand what it entails.
- Confidence in their youth and vitality: This applies to young people, such as those who are in their 20s to 40s. Young adults especially have a tendency to assume that diet and exercise are enough insurance to last them indefinitely throughout their lifetime.
- Insurance as a low priority: A lot of people know the value of insurance but put off getting it indefinitely until it’s too late or already too expensive.
What also makes underinsurance in Australia a difficult problem is that both individuals and businesses experience it, one time or another.
Who’s at risk of underinsurance?
Although anyone can be underinsured, you are especially vulnerable to it if you:
- Just got married or divorced
- Already have or are planning to have kids
- Experienced recent job loss or a reduction in income
- Got a loan or mortgage
- Have people depending on you financially, such as your parents or younger siblings
To reduce your risk of being underinsured, you need to make an honest assessment of your assets and liabilities, or simply your monthly incoming and outgoing. You also need to check the amount of life insurance you have against what you actually need and find ways to reconcile the two.
Because when you are underinsured, you may find yourself and your family to be financially at risk when an unexpected urgent expense comes up, such as hospitalisation or funeral expenses. Other life-changing events that could leave you vulnerable include losing your house to a fire, flood or unemployment.
Turn things around and avoid underinsurance
As mentioned earlier, there’s no need for you to become a statistic. There’s no reason for you to become desperate when a sudden major financial need arises.
To prevent yourself from becoming underinsured, you can always seek advice from an insurance broker. With the help of a licenced expert who knows the ins and outs of life insurance (or other forms of coverage you need), you can ask questions and get the information you need to make a wise choice. They can help you calculate your coverage requirements so you are no longer underinsured.
You should also make a point of reviewing your life insurance every time you experience a major life event, such as getting married or having a child. Talk to your family about the financial preparations you are making, and get their input and help so you can all look forward to a secure, happy life.
Contact us today to discuss your own personal situation.