When you think of love, it’s not common to think straight away of your insurance! You think of family, friends, and good times. However, should something happen to you, it is important that your loved ones be protected and looked out for.
In Australia, there is a massive underinsurance issue. Approximately 95% of Australians are underinsured. Only a third of the working population (12.5M) have income protection, which means that there are around 8.3M workers that are not adequately insured if they were unable to work due to injury or illness. Employees have sick leave, but self employed people don’t get that luxury meaning if they are sick and can’t work, they don’t get any income. A survey by finder.com.au was undertaken and it’s results showed that 55% of the population couldn’t survive not working after a period of 3 months. This is an average, because older people that are more financially sound have greater scope, whereas the younger population have lesser scope to cover that period of time.
If you think as an example that the average default superannuation cover provided by industry funds lies around the $200,000 mark, and the average sum insured deemed relevant by a 2015 Rice Warner study was $680,000, you can see that there is a massive shortfall. In a family with a mortgage and children involved, only holding $200,000 of cover would leave them in a detrimental hole.
There are some myths around having insurance, and that I feel is partly the reason why people tend to avoid it:
1. Insurance policies are extremely costly – What people don’t understand is that more often than not, knowing someone that has insurance and is paying $x in premiums, has a completely different set of circumstances to you. Whether this relates to age, sex, smoking status, occupation, income, or health situation. All of these factors impact on what premiums will come out to be. On top of this, people don’t realise that they necessarily have to fund the premiums from their personal cash flow, there are other alternatives to explore.
2. Insurance companies never pay out claims – This is a huge fallacy when it comes to insurance. You really only ever hear about the non paid claims on A Current Affair or the ABC, not the hundreds of millions and even billions in insurance claims that companies pay out each and every year. Each company releases these stats on a periodic basis and it is easily attainable. The main reason that cover may not be paid out is due to non-disclosure.
3. It’ll never happen to me – Around 20% of Australian families will be hit by an unforeseen event that will leave them unable to work, whether it is the death of a parent, injury, accident or illness. Everybody knows someone that has been affected by cancer, or had a friend, family member or colleague that has known someone that has tragically passed away, leaving behind a trail of destruction for their surviving family members.
Ensure that you look after your loved ones and review your insurances. Whilst there is a strong case of under insurance in Australia, there are people that are over insured, and paying more than they need to.
Please get in touch with our team to review your situation, there is no cost associated with doing so, and we may be even able to save some money, or re-structure your situation.
Steve Reynolds – Certified Financial Planner