With fewer than one in five Australians checking their levels of personal insurance, it seems we take a ‘she’ll be right’ approach to protecting ourselves. However, much of this attitude is rooted in confusion and a lack of understanding of how life insurance works, placing advisers in a pivotal position to educate clients.
We’re more likely to insure our car than ourselves
One way to begin the conversation about life insurance is to let clients know about a surprising fact: cars and other tangible assets are typically seen by Australians as more worthy of insuring, compared to their own lives and their families. Life insurance often plays second fiddle to other types of cover, with 76 per cent of Australians saying they insure their car, yet only 33 per cent say they also have life cover and just one in five (20 per cent) have income protection insurance (according to BT’s Australian Financial Health Index[1] (AFHI)).
Furthermore, approximately one in three (35 per cent) Australians rate their home as their most important insurable asset compared with just one in four (26 per cent) who rate life insurance as the most important form of cover. Protection against loss of income (11 per cent), total and permanent disability (10 per cent) and chronic illness or injury (nine per cent) all rank poorly as insurable priorities.
A lack of confidence in personal insurances
A lack of confidence in personal insurance products is a key factor behind significant levels of underinsurance.
Around one third (31 per cent) of Australians are ‘very confident’ their car insurance will meet their financial needs if a claim is lodged. By contrast, just 20 per cent are confident that term life cover will meet their financial needs – a figure that falls to 14 per cent for total and permanent disability (TPD) insurance.
This level of uncertainty highlights important gaps in knowledge – gaps that create opportunities for financial advisers to engage with clients.
Through the use of simple case studies coupled with straightforward conversations, advisers can highlight the way that life insurance and other forms of personal cover play a valuable role in household financial security.
Australians are relying on the internet to provide answers
The AFHI research also found that Australians are increasingly turning to the internet (80 per cent) and family or friends (73 per cent) when it comes to making decisions on insurance. Only 34 per cent would speak with a financial adviser.
The statistics reinforce the need for advisers to help with educating their clients about insurance. The appropriate type and amount of cover are highly personal matters, and financial advisers are well-placed to leverage their in-depth knowledge of each client’s circumstances to explain why their recommendation is suitable.
Reminding clients of the need for a review of personal insurance cover – at least annually, is a key stepping stone to ensuring your clients enjoy tailored protection from life’s curve balls.
Seize the opportunity with more insights
Seize the opportunity to engage and educate your clients regarding the safety net and peace of mind personal insurance can provide them and their family.
[1] The BT Australian Financial Health Index 2014, a nationally representative sample of n=4,450 Australians aged 18+, looking at their attitudes towards finance, money and retirement.
Rachel Leong, Product Technical Manager, Life Insurance, BT
