Australia is one of the most underinsured nations in the developed world ranking. Underinsurance is where the amount of insurance that you have is not enough to pay for you or your family’s immediate needs, when the event you are insured for occurs. While most people (83%) would never consider driving a car without motor insurance, less than a third of us insure our most important asset – our ability to earn an income. We are critically underinsured in the areas of income protection, life cover and TPD cover. These aspects are elaborated on in the following.
Life Cover: The median level of life cover meets 61% of basic Australian needs. “Basic”, in this case, means the minimum amount required to pay for all non-mortgage debt and sustain one’s current living standard until age 65 or until children reach age 21, should the main breadwinner should die. 22% of Australians have life insurance at all, and those that do are approximately $450,000 underinsured of average.
TPD Cover: The median level of total & permanent disability (TPD) cover and income-protection cover meet only 13% and 16% of their respective needs. This is a problem when 3 in 4 Australians are diagnosed with a serious illness in their working life. The reality of this can have tragic consequences for these individuals and families, which is only accelerated by the financial burden of the situation.
Income Cover: 18 families lose a working parent every day in Australia. 236,000 working age Australians are subject to a serious injury or illness and 17,000 of these are forced out of the workforce for long periods of time, sometimes permanently. Furthermore, only 4% of parents with dependent children have adequate cover to protect their family: that is, Australian family’s including dependent children are overall underinsured $1.37 trillion.
There have been many reasons given as to why this is the case in Australia:
Everything’s fine attitude: By international standards, Australia is a rather affluent society. An underestimation of the possible accidents and the severity of their consequences leads to a diminished perceived need for protection against life’s risks.
No history of illnesses: People who do not have any history of major illnesses such as cancer, heart problems, diabetes etc in their family believe that they will never contract such illnesses. Hence, the prevailing thought is that they will be able to earn money throughout their working years and do not purchase adequate insurance. However, accidents occur without warning and any earning member of a family could get injured when they least expect it. In such situations, if you are not adequately insured then you may not even have enough money to pay your medical bills, let alone manage your monthly living expenses.
It is so important for Australians to change these mentalities because the effect on these people is not just immediate – it can be generational.
References
"Australia’S Relentless Underinsurance Gap". Rice Warner. N.p., 2017. Web. 22 May 2017.
"Underinsurance In Australia | Life Insurance Finder". finder.com.au. N.p., 2017. Web. 22 May 2017.
"Underinsurance, A Problem In Australia? | Lifewise". Lifewise.org.au. N.p., 2017. Web. 22 May 2017.
