Australia has a $2 trillion underinsurance problem, with hundreds and thousands of people lacking the financial coverage they might need in the event of death, injury or illness.
Insurance has been thrown into the spotlight this week as Commonwealth Banks’ insurance arm, CommInsure has been accused of not making payments to clients who believed they were entitled to one.
It’s concerning to think within a regulated industry this could still happen.
Just as alarming is the number of us don’t even have adequate insurance should they be unable to work and need to replace lost income.
It’s not that we aren’t savvy when it comes to protecting what we own. Hunting around for the best home and contents, car and motorbike insurance is as Australian as throwing a chop on the barbie on a warm summer’s night.
But when it comes to considering coverage for our most prized asset - ourselves - we appear to be much more cavalier.
When you add up your income potential over three or four decades, it’s easy to see you will be worth far more than the value of tangible assets you already seek insurance for.
A report released by Rice Warner in 2015 estimated a family with young children needs $680,000 of life insurance cover but only has around $258,000, acquired through their default superannuation offering.
It might seem grim to add up what your family needs upon your passing, but it’s a necessity.
The goal of insurance is to provide for your loved ones if you pass away or become unable to earn the same amount of income you have built your lifestyle around.
Those who have little in savings, large debts and hefty financial commitments - generally younger people - can be in greater need of insurance plans with larger payouts.
On the other hand those who are older and have amassed assets - cash in the bank and superannuation - to cover expenses in a worst case scenario might need less cover.
For a family with a working spouse, the purpose of life insurance is to cover mortgage repayments or pay for a place to live, contribute to funding school fees and meet general day-to-day living costs.
Any non-working partners also need to be accounted for - if you were to pass away, there’s a cost to your work that needs to be covered - from childcare to home duties.
Insurance can also provide financial support in circumstances other than death.
The other types of cover include total and permanent disability, which can provide a lump sum payment if you become sick or injured and are unable to return to your usual employment.
There is also income protection insurance, which can replace up to 75 per cent of your income if you are temporarily unable to work due to sickness or injury.
Finally, there is critical illness cover which offers a payment if a certain illness is incurred, such as a heart attack or cancer.
It could be worth seeing a financial planner to help arrange the appropriate amount of cover read the fine print of an insurance policy - this needs to be understood clearly before diving in.
The bills don’t stop coming when we are sick or injured and having a plan in place can manage the emotional distress of significant life changes for you or your loved ones.