About 95 per cent of Australians are underinsured, according to a report by Lifewise, with most people citing their home or investment portfolio as their biggest asset.
However, HLB Insurance Services risk adviser, Andrew Kennedy, warns that this could be a grave mistake.
“Few people realise that their home or car isn’t their biggest or most important asset. Instead, it is their ability to earn income for the remainder of their working life,” he said.
“The average 30 year old earning $100,000 a year right now can reasonably expect to earn over $6.3 million by the time they retire.
“But while most people insure their car or home against loss or damage without a second thought, many people leave themselves completely unprotected against the accidents and illnesses that can happen to anyone.
“Not having a house or a car available when you need them could cause significant difficulties in your life, and insurance gives you the money you need to quickly rectify any problems and get back to normal.
“However, if your ability to go to work and earn an income suddenly disappears, then not only is the house and car likely to disappear, but everyday living expenses are also put at risk – your financial security could be lost overnight.”
Research conducted by Life insurance provider TAL in 2013 found that only 30-37 per cent of Australians aged 18-69 held life insurance and only 11-18 per cent held income protection, disability cover, trauma and critical illness cover. However, according to research from Rice Warner, those few Australians who do hold life insurance are still hugely underinsured.
Mr Kennedy said that for those who are unable to work for whatever reason, the right level of life insurance could help give them and their family protection and financial security.
“Many people are put off by the idea of needing so many different kinds of insurance, and may feel a bit uncomfortable thinking about what might happen if something goes wrong – and that’s completely understandable.
“It’s therefore important to help people understand when and why they might need to take out life or income protection insurance.”
He said key triggers for taking out this type of insurance were marriage, starting or increasing a mortgage, having children, sole income families, and financial changes.
He encourages Australians to consider the impact on their family’s lifestyle should they no longer earn an income, and if they can’t easily and comfortably afford to pay medical and rehabilitation costs, mortgage repayments, school fees etc… then it is time to think about life insurance.