Most young adults consider themselves bullet proof and it is great that they are confident about their futures. However things do go wrong for many people in ways they don’t expect.
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In Australia one in three men and one in four women will be diagnosed with cancer before age 75.
Among working people one in six men and one in four women will suffer a disability that keeps them off work for at least six months before age 65.
More than four million Australians, one in six people, have a disability of some sort. Two of every five people will suffer a critical illness before age 65. These statistics show that we all should have life and personal insurance.
According to Comminsure 70 per cent of Australians have car insurance and a car is stolen about every eleven minutes. Home contents insurance is held by 56 per cent of people and a home is burgled approximately every two minutes.
However only 17 per cent of people have life insurance in addition to the default amount provided by their super fund.
Only seven per cent have income protection insurance to replace their income if they are off work due to illness or injury.
Only six per cent of people have disablement insurance and three per cent have trauma insurance which pays a lump sum if they are diagnosed with a critical illness.
The parents of young children and people with large mortgages and debts need cover the most.
How will the debts be paid off if the family’s main income earner dies or is permanently disabled? Who will pay the mortgage payments if that person is off work for a long period?
Most super funds include some death and disablement cover but usually much less than needed – typically around $100,000 and reducing with age. The average mortgage held by young families is four or five times that amount.
Health insurance will help with medical costs but nothing else. Workers compensation doesn’t cover illness. The Centrelink Disability Support Pension pays $873.90 per fortnight for singles and $658.70 if one of a couple. That is just $17,126 per annum.
Fortunately insurance is much cheaper when people are young. They can also buy level premium cover so the cost doesn’t rise with age, as it usually does. Income insurance premiums are tax deductible cutting their cost and can be reduced by extending the waiting period.
Some types of insurance can be bought within personal super accounts and that is usually cheaper. However those paying for insurance through their super must sacrifice extra salary into super to prevent the cost eroding their super.
