Understanding underinsurance in Australia: Steps to secure your future

Australia faces an underinsurance crisis, leaving many exposed to unexpected life challenges. A quick scroll on social media might reveal fundraisers for families who’ve lost a loved one. Tell-tale signs indicate a worrying trend and numerous Australians lack adequate insurance. This article delves into the reasons and suggests how you can avoid becoming another statistic.


What is Underinsurance?

Underinsurance is the disparity between the life insurance an individual or family should possess and what they actually have. Despite some getting default life insurance through superannuation, the gap persists. When delving deeper into income protection and disability cover, the figures are even more concerning.

Why Many Australians are Underinsured:

  1. Perceived Expense: Many believe insurance to be an unnecessary financial burden. Yet, the costs of being underinsured can far outweigh the premiums. The solution? Research, compare, and understand the long-term benefits.
  2. Distrust in Insurance Companies: The fear of claims getting rejected leads some to bypass insurance altogether.
  3. Overwhelming Jargon: The complexities of insurance can be daunting, dissuading potential policyholders.
  4. Overconfidence in Youth: Young adults often feel invincible, relying on a healthy lifestyle to protect them against unforeseen events.
  5. Procrastination: Recognising the importance but postponing the decision can lead to unforeseen complications, especially as one ages or health declines.

Both individuals and businesses, at various stages, grapple with this issue, making it a pervasive concern in Australia.

Who is Most Vulnerable?

You could be at a higher risk of underinsurance if you’ve:

  • Recently married or divorced.
  • Had a child or are planning to.
  • Faced job loss or income reduction.
  • Taken a loan or mortgage.
  • Have dependents like younger siblings or elderly parents.

Recognising your risk can lead to more informed insurance decisions. Start by assessing assets and liabilities, understanding your monthly finances, and comparing your current insurance to what you genuinely require. Neglecting this can leave you exposed during major life events, be it health crises, property damages, or job losses.

Strategies to Counteract Underinsurance:

  1. Consult an Insurance Adviser: Engaging with professionals can demystify insurance for you. A licensed and accredited adviser can help identify gaps in your coverage and offer tailor-made solutions.
  2. Regular Reviews: As life evolves, so do our insurance needs. Marriage, childbirth, or purchasing a home are significant milestones that might necessitate a policy review.
  3. Family Discussions: Open dialogues about financial preparations can lead to collective decisions, ensuring everyone’s on the same page regarding future security.
  4. Stay Updated: Insurance isn’t a ‘set-and-forget’ aspect of life. Regularly updating coverage can ensure you remain protected as circumstances shift.

Underinsurance can spell disaster during life’s unpredictable turns. But with informed choices, regular check-ins, and leveraging financial advice, it’s possible to ensure you and your loved ones remain shielded against unexpected financial burdens. After all, preparation today can guarantee peace of mind tomorrow. If you’re at the onset of your financial planning journey or seeking specialised guidance, it’s advisable to connect with a Financial Adviser. Your future, and that of your loved ones, deserves the security and peace that comprehensive insurance can provide.


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.

This information does not take into account the objectives, financial situation or needs of any person. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.

(Feedsy Exclusive)


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