What Insurance Cover Do You Need?
Australia has certainly been through the wringer in the past three years. Kicking off with those catastrophic bus fires of the Summer of 2019/20, followed by the February floods, and as if that wasn’t enough, Covid-19 first reared it’s head in Australia in January 2020.
Since then it feels like we haven’t been able to take a breath between Covid flare-ups and floods. The psychological and financial impact of these disasters has been enormous, impacting not just our homes, but our health, our jobs and sadly, our lives. As confronting as it may be, it is essential to be prepared for the unexpected, so we thought it timely to have a look at what insurance cover you might need to put in place to help minimise the stresses of the uncertain times we live in.
Whether you are concerned about Covid-19, or about natural disasters like fire or floods, your life and livelihood are important. There are a number of types of personal insurance cover that you should consider, particularly if you have dependents. In fact, it is estimated that less than 42% of Australians have sufficient insurance cover for the family to maintain the same standard of living should they die or no longer be able to work.
Life Insurance – Will provide your loved ones with a lump sum should the worst happen. How much insurance you need will depend on your circumstances, but at a minimum you should aim for sufficient to discharge any debts, like mortgages, so your family will be secure.
Income Insurance – Whether you can’t work because of an accident or illness, or because you have lost your home or business due to natural disaster, income insurance will provide you with funds to live on until you get back on your feet. The natural disasters Australia has experienced over the past few years highlight the importance of this type of insurance cover.
TPD – Total or Permanent Disability Insurance covers you should you be incapacitated by accident or illness, and is essential to cover things like ongoing care and therapy, modifications to your home and loss of income. If you are thinking about this type of insurance take a good look at the inclusions and exclusions of various policies and make sure they suit your circumstances.
Trauma – Provides a lump sum should you experience an accident or illness that prevents you from working temporarily.
According to ASIC, up to 80% of Australian homeowners are currently under-insured. By 2030, just a few short years away, one in twenty-five Australian homes will be uninsurable, and one in ten will be ‘medium risk’.[i] Uninsurable means the expected annual damage to a property due to climate events like bushfires and floods, is likely to be more than 1% of the value of the home.
So, if your house is worth $1,000,000, and potential damage might be worth more than $10,000, you will either not be able to get insurance, or the premiums will be so high as to be realistically unaffordable. If you’ve had any sort of renovations or repairs done to your home recently, you will know that $10,000 doesn’t go very far at all.
The impact of this goes well beyond not being able to replace your home should the worst happen. If you are unable to get insurance on a house, it is likely you will be unable to sell it, as anyone buying a house is required to have insurance as part of their mortgage agreement. This will materially impact the value of homes in a great many Australian postcodes, and potentially decimate whole suburbs and towns.
If you own, or are thinking of buying, a property in a medium risk area, it’s important to do your homework. Talk to multiple insurance companies about the level of risk they would apply to the house in question, and think seriously about whether this might present problems in future. As we have seen, the idea of a 1 in 100-year flood is no longer accurate in predicting risk.
If you do decide to purchase, or are already living in a medium risk area, most insurance companies will have a list of things that will help keep premiums down, even if only slightly. This might include:
- Using or installing fire-retardant materials for windows, walls and roofing
- Ensuring you have a documented fire and/or flood evacuation plan, including multiple exit points from the property
- Sprinkler systems inside the house and on the roof
If you are building in a potential flood zone, choose the highest ground possible and consider a ‘raised’ house, something like the old Queenslanders. And if fires might be a threat, ensure you use suitable materials, have a clear fire break and sufficient water supplies and sprinklers to protect your home.
From a personal perspective, there are also a few things you should in cases the worst should happen:
- Keep all your important documents together in one place, so if you have to leave quickly you can ‘grab and go’
- Digitise as much as you can, and email it to yourself. That way, you will always be able to access it from anywhere.
- Anything you feel you can’t replace, like family heirlooms, keep a note of what they are and where, again, so you can make it easy to grab and go
- Scan all your photos, and either store them on the cloud, an easily accessible flash drive, or small hard drive. You might even like to give a copy to a family member to keep in another location
If you are concerned that you have insufficient levels of insurance cover to meet your needs and secure your family’s future, you would like to review the insurance you have, or think you might need to take out additional types of insurance, Manly Financial Services can help evaluate your position and provide clear, unbiased, and expert advice. Give us a call on (02) 9976 3388, or contact us via the below link.