
Get exclusive money-saving offers and guides
Straight to your inbox
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
Just because you have insurance doesn't always mean you're completely covered. Underinsurance is a big problem in Australia; it can leave you with hundreds or maybe even thousands of dollars of expenses left uncovered, even if you have insurance.
Underinsurance is when you fail to take out enough insurance to completely cover the costs if something goes wrong. Essentially, when your insurance policy pays out, if it's not enough to pay for everything that it was intended to cover, then you're underinsured.
For instance, if you were to take out a life insurance policy for $200,000, but needed approximately $600,000 to pay off your home loan, school fees and credit card debts and to allow your loved ones to continue the same standard of living, you would be underinsured. When you pass away, your loved ones would still need to come up with $400,000 to cover the rest of your fees, debts and loan repayments.
Underinsurance also means that you've been paying monthly or annual premiums, probably for a number of years, only to not receive all the cover that you actually need.
Underinsurance can be scary, but if you take out the proper amount of cover, it's not something you need to worry about. Here's what you should consider getting:
$250,000
$300,000
$400,000
$3,231
According to the most recent statistics from Rice Warner's Underinsurance Australia report, only a third of the working population in Australia have income protection insurance. A summary of Rice Warner's report by Vanguard Investments also revealed that if the average Australian was to use their life insurance, then only:
Here's a look at what an average Australian family can expect if they are underinsured:
There are various myths surrounding insurance, which could be the reason for Australia's severe underinsurance problem. Here's a look at some of these myths, as well as a look at what the truth really is:
A lot of Australians believe that if they have great health, they don't need insurance. Only people who have health issues or a history of genetic illnesses in their family require insurance.
However, Insurance not only protects you in case of injury or serious illness, but it also covers you if you die unexpectedly. Some other reasons to get insurance if you're young or healthy or both, include:
There are countless other reasons besides your age and health to get life insurance. Ultimately it's about protecting what you already have well into the future.
Most people believe that insurance is way too expensive and that they would never be able to afford it. However, there are a number of ways to find affordable cover that can suit your individual needs. Some ways you can lower the cost of insurance include:
3. Myth: Insurance companies never pay out claims
You've probably heard from friends, family or on the news, the difficulties in getting claims paid out by insurers. While we hear a lot about the bad, it can cloud the fact that in general, insurance providers do more often than not, pay out eligible claims.
You can even check the claims performance for most insurance brands. This information is mandatory reporting for insurance brands and it can help you make a decision about the trust you put in your insurance.
It is true that the Australian government can provide certain benefits to people who lose their jobs or become unable to work. However, you should think logically about whether that assistance is enough for you or your family to get by.
In many instances, Centrelink payments might not be enough for you or your family to keep up your lifestyle should something happen. If you have a high amount of debt or your living expenses are more than what could be funded by minimum wage, Centrelink likely won't be enough for you or your loved ones to get by.
If you're already on top of your finances, it's probably easier for you to figure out how much money you would need if something were to happen, be that a serious injury or your death. Taking note of all of your debts, loans and assets and working out your household's monthly expenses are huge steps towards ensuring you're not underinsured.
Price should definitely be a big factor when you take out a policy, but it's not the only factor. Make sure that your premiums aren't cheap because the payout will be a lot less than you need. Look at the product disclosure statement (PDS) of a policy before you purchase it to find out what's covered and what's not.
Our free life insurance calculator can give you an estimate of how much you may need, taking into account your earnings, expenses, assets and debts. However, it's not a substitute for speaking to a broker, who can provide you with professional advice.
Retail life insurance cover is usually recommended through a financial adviser. If you want to prevent underinsurance, an adviser is probably your best option. It will likely cost you more than doing it alone, but they will help you work out exactly what kind of cover you need.
Today's best Finder Daily deals include: 35% off Dungeons & Dragons, 50% off New Balance shoes, Cheap Echo Show 5 smart home hubs.
These are the 8 best bassinets you can buy right now in Australia.
The Kia Stinger 330S costs $9,800 less than the top of the line GT model. But should you buy it?
Oral B’s smarter electric toothbrush provides an exceptional cleaning experience, but its price point will put it out of the reach of many.
Add big value to your house without a major investment with these top tips.
These are the 9 best nappy bags you can buy right now in Australia.
These are the 6 best booster seats you can buy right now in Australia.
Finder research shows 2.7 million Australians have a car loan. Find out how much Aussies are borrowing, and how this has changed over time.
Getting a mortgage has long been a clunky, time consuming and paperwork-heavy process, but a new Australia Post partnership aims to help.
Robinhood is set to go public as soon as June. Here's what you need to do to buy in from Australia.
One Response