Were you underinsured when you had to stop work due to injury or illness?

Thousands of Australians trust their insurance adviser to ensure they have enough cover to provide financial support in the event of injury or illness.  Unfortunately, the advice can be inappropriate, leaving you or your family with an ‘underinsurance gap’ at time of claim. Find out of if your insurance has enough cover to support you when you need it. 

What are the main types of insurance?

The main types of insurance sold by advisers are:

• Death cover and total and permanent disability (TPD) cover, paid as a lump sum if you die or medically retire from suitable work;
• Trauma cover which pays a lump sum if you suffer a specific diagnosis such as cancer, heart attack or stroke;
• Income Protection which pays a monthly income supplement if you are unable to do your regular job because of injury or illness.

These products are supposed to cover housing costs, repayment of debts, funeral costs and the income support needs in case of death or disablement preventing you from working. 

How much insurance cover do you need?

Most working Australians get their death and TPD disability cover through their superannuation membership. While these automatic cover amounts are an important safety net, they may not be enough to meet your insurance needs. 

Rice Warner’s Underinsurance in Australia 2017 report estimates the insurance needs for a 30-year-old parent with children to be:

• 8 times family income for life insurance on income replaced basis,
• 4 times family income for TPD insurance, and
• 85% of family income for Income Protection.

However most Australians have an underinsurance gap which means their insurance is not sufficient to meet their needs, leaving them at risk of significant financial hardship.  In fact, recent research estimated that insurance cover held across Australia were sufficient to only meet 29% of TPD needs. 

This gap has widened significantly between 2010 and 2019 as the average mortgage doubled in New South Wales and Victoria and rose by over 50% in Queensland.

Are you eligible to make an insurance claim?

Many people only realise they have an underinsurance gap after they become disabled and discover their cover is inadequate to meet ongoing expenses, debt and care needs.

This can easily occur where an insurance adviser takes a ‘set and forget’ approach by failing to conduct regular reviews, which they are usually required to do annually.  If you have had a pay rise since you purchased income protection cover, there is a good chance that you’re underinsured. 

Maurice Blackburn have successfully claimed compensation for consumers from insurance advisers who failed in their duty to ensure adequate cover was in place. For example, we recently acted for a widow who successfully claimed hundreds of thousands of dollars in compensation against her adviser because her late husband's life insurance was insufficient.

You might have a claim for compensation if:

• You ceased work due to injury or illness and your Income Protection insurance did not cover you until retirement age or paid out less than 85% of your normal income,
• Your TPD was not enough to provide ongoing financial security for you and your family,
• The life insurance of a deceased family member was not enough to meet all debts and support their family financially,
• You didn’t have any insurance or your claim was denied by the insurer for any reason.

Even if you have been paid a disability insurance benefit, you might have a claim for the rest of the insurance cover you should have held if the insurance advice was conducted properly.

Maurice Blackburn’s free cover check

Maurice Blackburn's financial advice lawyers are experts in identifying underinsurance gaps and claiming compensation for the benefits when you need them the most.

We offer an obligation-free cover check at no cost, where we checking what cover your financial adviser should have provided to you.

If you have a claim for compensation, we offer 'no win, no fee'* arrangements, which means that you don’t have to pay for our legal services if we don't win.

We understand the importance of having someone in your corner when you're taking on a well-resourced insurance company. Contact us today to receive a cover check and to find out how we can help.