The Superman Syndrome

Unfortunately there are many people out there who are still significantly underinsured. In Australia I feel it is one of our greatest problems that normally gets overlooked for other topics that grab our attention.

I’m sure we have all seen the ads before we are about to watch a new DVD where the big header comes up on the screen “You wouldn’t steal a movie” referring to consumers downloading content illegally. I often think of risk insurance in a similar vein.

If you think about it we wouldn’t dream of driving our car out of the garage without first making sure it’s covered with the majority of us opting for fully comprehensive cover. We will also go to the extent of obtaining cover notes for any new cover just to be sure in case something happens in between changing providers. We operate very much the same way with our home and contents insurance.

There is absolutely nothing wrong with this however I often ask myself why the same level of care isn’t taken when dealing with risk insurance specifically Life, Income Protection, Total and Permanent Disability and Trauma cover.
I think for most of us we have all more than likely had a ‘prang’ in the car or had or know of someone who has been robbed.

We are also made to insure our cars and homes by the lenders who hold them as security to ensure they are not left short if something did go awry. This for me I feel is the biggest reason why there is such a large underinsurance problem in Australia for risk insurance.

Only 6% of Australians are adequately covered and there is a growing need for advice to be provided in this area for Aussie’s especially those with young families or large debts hanging over their heads.
I would argue that at least 90% of Australians need income protection and that’s probably being generous. For most of us if we lost the ability to earn an income for the rest of our working lives this would have an enormous impact on our livelihood and our lifestyle in retirement.

Someone aged 35 today should earn on average roughly 2.3 million dollars leading up to turning 65. Let me just say that again 2.3 Million Dollars, I’m guessing that’s more money than perhaps your car might be worth.

While I’m being a little smart with that last comment it does illustrate the sort of money being put on the line by not making sure you’re covered. Imagine a young family with a young father who hurts himself in a boating accident leaving him in a position where he is unable to work again. His wife looks after the kids currently and the family income is largely provided by him.

In a scenario without cover he would be paid his sick and annual leave entitlements from work and then commence receiving the Disability Support Pension (currently $566 per fortnight as a member of a couple).
This could jeopardise the whole family’s future. The school the kids were going to go to, the holidays they had planned on taking, the house they were about to buy and the retirement they planned on creating together.

It will already have an extremely big impact on them emotionally and physically so why not remove the financial stress from the equation. If you struggle to understand why insurance is required or why you’re paying our money with nothing to show for it try to think of it as the framework that holds up your financial house. Without it your whole world can come crashing down like a house of cards.