While the title of this post may surprise some people, it’s actually a rhetorical question. In fact, as far back as 2005, the Australian Securities & Investments Commission (ASIC) was already reporting on home building underinsurance. There might even be older reports in existence if one searches hard enough.
Various insurance companies and publications have also written about underinsurance – like this 2014 article by Elders Insurance and 2016 post from Independent Financial Adviser (IFA), for example. Studies on Australia’s underinsurance problem have also been carried out over the years, including this one by Rice Warner released in 2020.
So, really, experts have established with absolute certainty that Australia has an underinsurance problem. We also know that Australians are a family-loving lot. But why, then, don’t more people get adequate life insurance to protect their families?
Why are Australians underinsured?
When you have insurance but it is inadequate to provide enough protection for your personal situation, you are said to be underinsured. You are also considered underinsured if you don’t have insurance at all – save perhaps for what’s provided via your superannuation.
Some common reasons that have been identified behind this widespread underinsurance problem include:
- People’s general lack of understanding of what life insurance is and what it’s supposed to cover
- The thinking that life insurance is too expensive
- An overly laid-back attitude toward life challenges that makes people feel they don’t need insurance
- Assuming that the life insurance cover offered via superannuation is enough protection
Most people don’t consider what would happen to them and their families should they suffer from permanent disability or a debilitating disease, or pass away.
When any of these things happens, you’ll need to think about how you’ll make debt repayments if you have credit cards and a mortgage. You also need to factor in the needs of your children as they grow, as well as your lifestyle. Will you be able to keep it up even when misfortune strikes?
Ensure you and your family are protected
Although acknowledging that life is unpredictable might be difficult, doing so can prepare you better for life’s unexpected twists and turns.
How can you be certain that you and your family have enough coverage if you already have insurance?
- Know the details of your policy. To fully understand what your insurance does and doesn’t cover, and for how much, take the time to read your product disclosure statements and policy schedule. Ask questions if anything is unclear.
- Reassess your finances. Examine your current financial situation and, if you have one, talk to your accountant. Determine how much your emergency funds can cover if you’re fortunate enough to have them.
- Keep your policy updated. To upgrade your insurance to the appropriate level of coverage you need, speak with your insurer. Get in touch with them if your family situation changes or if there is a new member to make sure your policy still provides enough cover.
If you’re uninsured, perhaps it’s time to speak with an insurance broker or your financial advisor.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.