Underinsurance is Common in Australia
It may or not be a big surprise that among developed nations, Australia belong to one of the underinsured nations. Surveys and studies have shown that a great number of Australians have insufficient cover whether it is home, business, or life insurance. In fact, it has been found that parents with dependents under them are surprisingly underinsured by $1.30 trillion – such a staggering figure.
While compulsory life cover in superannuation funds has helped to bridge this staggering gap, many Australians will depend on this default cover without taking into full consideration the amount that is really needed to cover their financial obligations. Reports have showed that the amount of life cover provided in Super is only about 20% of what is really required.
What more, the areas where underinsurance occur are under life insurance and income protection. The percentage is shown below:
- Income protection insurance : 45%
- Life insurance: 54%
- Private health insurance: 69%
- Home content/Building insurance: 77%
- Car insurance: 79%
Source: LifeBroker, 2011; Comminsure, 2012
It goes to show that most Australians value their cars and homes more than they value their future and income. It is both sad and scary at the same time since another study has shown that Australians are exposed to different risks all the time:
- More than 3 out of 4 Australians are likely to be diagnosed with critical or severe illness during their lifetime.
- Somebody dies of heart disease every 22 minutes in Australia alone.
- By age 85, 1 out of 2 Australians will be diagnosed with cancer, 60% of whom will live 5 years longer after diagnosis.
- One stroke occurs every 12 minutes in Australia.
What more, another statistics have shown that:
- 6 out of 10 Australians with dependent children have inadequate cover for their families in the event of death or permanent disability.
- 96% of families are suffering from underinsurance that would cover them for 10 years onwards.
- 80% of Australian homeowners are likely not to receive adequate home insurance payouts to rebuild their homes if it is destroyed.
In addition, two-thirds of those people who have either life or income protection insurance within their superannuation have their insurance at the default level. This means that the level of insurance they have is very low and won’t be enough to cover them if such unfortunate events occur.
Life without Insurance
Some may still argue that the Government has designed special forms of assistance in the event of injury and illness; thus, life insurance or income protection is not necessary. However, before making the drastic decision of not purchasing life insurance, you must understand the coverage and limitations of such Government designed assistance, like Workers Compensation or the health fund.
- Workers Compensation – this is a type of insurance mandated by the Government to provide wage replacement and medical benefits to employees who have sustained work-related injuries. Although it covers most types of injuries, the benefits you will receive is set according to the maximum amount set by the government.
- Social Security- you could receive payments for disability through your social. However, the maximum coverage can only extend up to two years. In addition, it may not be enough if you have a family.
- Private Health Insurance – it could cover a number of medical expenses but not mortgage payments or daily expenses.
On the other hand, life insurance covers a number of areas which can be very beneficial to you and your family.
- Medical Expenses – with medical care getting more and more expensive, life insurance can be a wise move as it covers emergency medical care as well. The freedom your family have against financial stress is priceless knowing you have something to cover you if such events happen.
- Funeral Expenses – Death brings both emotional and financial stress especially if the person in question happens to be the breadwinner. Life insurance pay off final expenses death can incur including outstanding debts.
- Legal Expenses – When there is outstanding debt and your estate might be in danger of confiscation, life insurance can provide both the payment to secure your estate and pay for the legal costs.
- Needed Loans – When you happen to be really strapped for cash, life insurance can prove to be very helpful as you can use it as a capital, or as collateral for a loan to get the needed cash.
Aside from the above mentioned reasons, life insurance can also give you financial security and peace of mind, because you know there is always something to help you eliminate any financial needs.
The premium you might be paying every month is well worth when you think about the benefits you could gain. Just imagine not having insurance to cover you and your family and it will be easier to picture the hardship that an inadequate cover can bring.
Insurance and Superannuation
Since disability and death are automatically included in most superannuation funds, it is more common nowadays that people opt to purchase their insurance through their superfund.
Although you can get a lot of tax concessions when you buy insurance through your super, it is still advisable to check the type of cover it includes. Since most of the estimation is based on your salary, there is a higher chance that the cover provided won’t be enough.
Facts show that there is a big percentage of underinsurance in Australia. However, this should not be the case in your household. By looking for the right insurance that would complement your budget and your lifestyle, you can get your family covered and be assured of the security it brings in whatever unexpected things thrown your way.