Common personal insurance mistakes and how to avoid them

Published on: July 14th, 2020

COVID-19 has many of us thinking about our health and our finances, and if you are serious about protecting yourself and your family, it’s a good time to review your personal insurances. It’s not the most pleasant topic, but it is an important one. An estimated 96% of Australians are underinsured when it comes to life insurance, and while I don’t have the figures, my guess is that it would be similar for income protection.

Unfortunately, in our industry, we witness the impact underinsurance can have at some of life’s most difficult times. Here are some of the common mistakes we see and how to avoid them.

Not having cover

If you are in early-mid adulthood or in good physical shape, it can be easy to think that these events are unlikely, and therefore insurance is unnecessary. While this belief is understandable, it’s also incorrect. Accidents, injuries and illnesses happen to people of all ages, and sadly, we see the financial devastation they leave in their wake.

Instead of focusing on whether it’s likely to occur, it’s important to think about what would happen if it did: How long could you or your family maintain your current lifestyle without your income?  Some of the impacts we’ve seen first-hand include losing the family home, needing to relocate to more affordable areas away from social networks, and children no longer able to attend their current school or struggling to pay for tertiary education.  The impact of lost income can be far-reaching, so if you don’t have cover, the question really isn’t why should you… but why don’t you?

Relying on the cover included in your super  

Many of us feel protected because we have insurances included in our superannuation. If this is you, ask yourself what protection you have. If you don’t know in any great detail, it’s essential to take a second look. Many of these policies are not comprehensive, and may only cover you for a percentage of your monthly income or may be capped.

These policies and the definitions within them can also change, and you may not even be notified. For example, some of Australia’s largest superannuation firms recently changed the definitions of Total Permanent Disability, making it harder for customers to claim.

It’s also important to remember that you are paying for the premium from your superannuation, it’s not free. I work with many Apt clients to review superannuation insurance, and in many cases, we find not only is the cover inadequate, but the right cover costs a similar amount, sometimes even less. 

Not knowing what you are actually covered for

Whether it is our home, car or income, many of us buy insurance without reading the fine print and understanding what we are covered for. And it’s easy to see why. Product Disclosure Statements are lengthy, boring and often written in industry jargon that makes it hard to determine what your premium covers.

When it comes to your income protection and life insurances, you should be looking for comprehensive policies that cover you in a range of circumstances.  In today’s climate, making sure you are covered for health issues arising from pandemics should be top of mind.  Another area to think about is cover for income loss due to mental health issues, such as depression, stress and anxiety.  Again, it’s an area you might think you don’t need, but it’s a very common claim. The mental health condition doesn’t need to have arisen from work. Rather, it needs to impact your ability to work; so we might see a rise in mental health claims following natural disasters, like bushfires or floods, or even a pandemic.

This is one area where a risk specialist can really help. We work closely with you to understand your lifestyle, goals and financial situation to determine your insurance needs. We can then find the right cover for you without you having to find, compare and understand multiple options.

Setting and forgetting

Think about how your life has changed in just the past decade – if your lifestyle isn’t exactly the same, your insurance needs probably aren’t either. Many Australians choose policies and continue to pay them for years, without checking whether they are still relevant and providing the right level of cover.

Circumstances change, as you get older, you may have less debt, higher income and/or fewer dependants, and if you haven’t changed your cover accordingly, you may be overpaying.  Regularly reviewing your insurance is critical to ensure you have the right level of cover at the right price.

Going it alone  

Comparing and understanding insurance options can be difficult and time consuming. Even worse, you can end up with insufficient cover, something that likely won’t be exposed until you or your family are in a vulnerable position.

It’s something I love about my job as a risk specialist; I get to decode this for people, making it simple and easy to get the right cover now and into the future. If you choose to work with a risk specialist, you won’t need to compare multiple policies or understand industry jargon, you can just explain your needs and let us take care of it. This way, you can feel confident that should the need to claim ever arise, you or your family will get what they are entitled to, and more importantly, what they need to continue living the same lifestyle.

If you are thinking about your personal insurances, get in touch to find out more about how we can help you navigate your options.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.