Advice Market Blog

The Real Cost Of Not Insuring Your Income and Your Life?

August 1, 2016


We all know that insurance comes at a cost, and for some people, the cost is dissuasion enough. But what you need to consider is whether you and your family can afford not to have insurance. It is an unfortunate fact that we can’t always protect ourselves or our loved ones from risk, misadventure, and tragedy, so what is the cost of not insuring your income and your life?

If something were to happen, there is the very real possibility of having to pay for long term care and medical expenses which could throw your financial stability into utter disrepair. If you’re concerned about the limits of your income right now, consider how financially unstable you would be without that income. The benefits of insuring against an unfortunate circumstance, far outweigh the cost of the insurance, whereas underinsurance on the other hand, can have a devastating affect on both you and your loved ones.

A 2010 NATSEM report ‘Understanding the social and economic cost of underinsurance’ found that:

  • one in five families are impacted by the death of a parent, a serious accident or illness that renders a parent unable to work
  • the typical Australian family loses half or more of their income following a serious illness, injury or the loss of one parent as a result of underinsurance
  • ninety-five percent of families do not have adequate levels of insurance

Consider these statistics, consider the implications, and consider your individual situation, in order to make an informed decision about purchasing insurance. Income protection, trauma insurance and life insurance are there to protect your future in the event that something does happen. It is especially important if you have a family of your own, or any major financial commitments, such as a mortgage or other debts, which, without proper coverage, could fall onto those you love in the unfortunate event of illness, injury, or death.


How much insurance you require is entirely dependant upon your individual situation, but it’s important to consider all factors and purchase the best cover that you can afford, as opposed to simply choosing the cheapest cover available. The right amount of cover for you should ideally reflect your family’s immediate and ongoing financial needs such as:

  • Mortgage and / or other outstanding debts
  • Everyday living expenses – rent, bills, groceries
  • Standard of living – outside of the necessities, what other costs are factored into your lifestyle, such as entertainment, gym membership, subscriptions etc.

Income Protection

Income protection insurance replaces the income lost through your inability to work due to injury or sickness. Having a continued salary in this difficult time could be an invaluable asset. If you rely on your income to get by, then you need to consider what the alternatives are if you are unable to earn that income. Income protection usually offers cover for up to 75% of your gross wages over a fixed period of time. Unless you have this amount of money saved up, you will need additional support to cover your living costs in the absence of your income.

Trauma Insurance

Trauma cover provides a financial safety net in case of a serious illness or injury which makes it difficult or even impossible for you to continue working. Review the options available to you if such a thing were to happen. What level of private health insurance do you have? What type of insurance is offered through your superannuation fund? How much money do you have saved in case you and your family need to live without your income for a time? What other help is available to you? Are you eligible for government benefits or workers compensation? If you suffer from a trauma, whether that’s injury or illness, consider the stress you will already be under, and make sure you are in a position to deal with the financial ramifications so that you are afforded the time to recover, or care for yourself and your family during this difficult time.

Life Insurance

Whether you have dependents of your own or your parents to think about, you need to question what would happen if you died. Would your family be able to pay your funeral expenses? Would your family be able to continue to pay their living expenses without you? What about the long-term? Would your children be able to live the life you and your partner had planned for them without your income to help them along the way? Life insurance will make sure that your family is provided for in the event of your death.

People tend to overestimate the cost of an insurance policy, when there is in fact a range of insurance products available to suit different circumstances and budgets. Seek professional advice and don’t just consider the cost of the insurance, consider what it will cost you and your loved ones if you are uninsured.

If you would like some advice surrounding your own insurance needs, contact one of our expert advisers today.

The information provided is intended as a guide only and does not take into consideration your personal situation, needs and objectives and should not be considered as advice of any nature.

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By AdviceMarketeditor