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Australia’s underinsurance – not just about the level of cover

Most people generally dislike insurance, whether it is the thought of paying for something you hope to never use, or the classic ‘it will never happen to me’ mindset, we all have an instinctive reaction to the concept. Add to this the reality that we have all probably had a scenario where we assumed our insurance covered us for a given event only to find that the small print has delivered the insurer a ‘get out of jail free card’.

Despite all the negative coverage about insurance and despite all the negative personal experience, Australia is actually improving its epidemic of underinsurance. In this article I am talking about life insurance and income protection for doctors as opposed to home and contents or vehicle insurance.

Based on a recent survey by Rice Warner Actuaries, our overall level of underinsurance as a nation has improved from $1,000 billion in 2006 to a mere $669 billion in 2010. Whilst the issue has certainly not gone away we must agree this is a significant improvement.

The report further suggests that the improvement in these figures has come from a combination of higher default cover in superannuation funds, an increased focus by financial advisers (especially following the GFC) and a much more active direct insurance market that allows us to phone in and buy a level and type of cover over the phone.

I would add a further argument that the financial advisers have been focussed on insurance inside superannuation so to make cover more affordable to the policy owner and ultimately easier to sell.

As mentioned above, most of us have had a bad experience when trying to claim on insurance and it is important to accept the fact that the devil is in the detail. For all our medical clients, life insurance and income protection products are used to protect the most important outcomes we are seeking to achieve in our life; protecting our loved ones, ourselves and our way of life. The detail has never been more important.

It may be true that the majority of this growth in insurance cover has come through the superannuation environment, but keep in mind this is low cost cover and with that comes low quality definitions. Do not assume that your superannuation fund has enough cover for you.

When we explain the types of scenarios (often likely scenarios) where a slightly more comprehensive policy will provide a benefit when compared to its cheaper counterpart, our clients more often than not decide that the purpose of the cover is more important than the change in premium and the decision becomes easy once armed with all the information.

This process is about taking a good look at the insurances you pay for, deciding with the full information whether they present good value for money and are in fact covering you in the way that you think.

MEDIQ advisers assist our clients to answer these important questions as part of our integrated accounting and financial planning service for Doctors. If you are a Doctor with personal responsibilities of a family and would like to discuss your insurance needs, please contact our offices to arrange an appointment.

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