As research has proven time and again, both businesses and households in Australia usually have inadequate insurance.
When you don’t have any insurance at all or your insurance coverage is insufficient to cover your needs, you’re said to be underinsured. You are also considered underinsured if your insurance does not cover the cost of loss or damage to your possessions.
If underinsurance is so widespread in Australia, are there ways to avoid it?
In this post, we dive deep into business and household underinsurance and provide tips on how to avoid becoming underinsured.
In Australia, underinsurance in business is common — it’s widely believed that one in 10 businesses lacks insurance.
The reason behind this is that many firms operate based on the belief that a crisis will never happen — at least, not one that will affect them adversely. They also don’t fully comprehend what insurance plans apply to them. Additionally, many small and medium-sized businesses (SMEs) typically view insurance as wasteful spending.
Many SMEs try to keep their insurance costs as low as possible in order to save money and maintain their cash flow. However, when it comes to insurance, keep in mind that the coverage is rather limited if the premium is cheap.
Adequate business insurance should ideally cover business disruption, professional liability, and worker’s compensation. Cyber insurance should also be taken into account if you conduct business online to safeguard you from ransomware and other types of cyberattacks.
Inadequate insurance for Australian households
Australian households are no different when compared to their business counterparts.
According to the Insurance Council of Australia, around 23 per cent of Australian households don’t have contents or building insurance.
Your home is likely your most precious possession, so it only makes sense to insure it adequately against risks like fire, flood, storm damage, and other disasters. People who believe that these situations won’t happen to them can and will experience them.
If your home is underinsured, not only will you not receive enough money to cover the cost of your loss, but your insurer may also have the authority to only pay a portion of any damage.
Tips to avoid underinsurance
Although you may feel tempted to scrimp on insurance, remember that regrets come later when disaster strikes. To avoid being underinsured, consider these tips:
- Periodically review your finances, circumstances, and the insurance coverage you require to ensure your possessions are covered. Your insurance requirements will vary over time, so it’s critical to update your policies routinely.
- Familiarise yourself with your coverage and exclusions in your policy.
- Consider your requirements and replacement expenses when making insurance-related decisions. What would you need to replace lost or damaged items, maintain your company or current living standards, and pay ongoing financial responsibilities in case disaster strikes?
- Always budget for your insurance premiums.
Protect your household and your business.
IMPORTANT: Speak to an Insurance Broker or Financial Advisor to know your options.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.