Underinsurance is a common problem in Australia. According to the Insurance Council of Australia, many Australians are underinsured. Several misconceptions about insurance have led to underinsurance in both Australian households and businesses.

One of the most common misconceptions is that insurance is too expensive or out of reach. However, there are ways to reduce the cost of insurance through solid risk management, adhering to industry health and safety guidelines, and shopping around for the best deal. Business owners and individuals can also opt to pay their premiums by monthly instalments to better manage their cash flows.

Relying on outdated figures or assumptions is another common problem. Homeowners and renters tend to accumulate new possessions over the years but fail to increase their contents cover to match. Business owners also need to review and update their insurance coverage when making changes to their business, such as expansion or relocation.

Many people also tend to focus mainly on the cost when shopping for insurance. However, opting for the cheapest cover may not be the best option. It could mean that in a catastrophe, there may not be enough cover to rebuild or replace lost items. Therefore, it is important to check which events are covered and for how much when shopping for insurance.

Skimping on the detail is another mistake that people often make. Reading insurance documents such as product disclosure statements might not be fun, but it is important for understanding the details of the policy. It is important to take the time to read the details of your policy or ask your broker to explain it to you.

Automatically opting for a low excess is another common mistake. While this might seem like a good option, it usually results in paying higher premiums. It is better to pay a higher excess in a claim and in the process reduce the cost of your premiums.

Finally, some people assume that insurance companies avoid payouts. However, this is not true. Most legitimate insurance claims for losses are accepted and paid. If a claim is not accepted, policyholders have recourse to internal dispute resolutions, complaints departments, or to the Australian Financial Complaints Authority (AFCA) to assist them.

If you are looking to buy business or personal insurance, you do not have to go it alone. An insurance broker can help you secure the best cover for your needs, explain your policy to you, and answer any questions you have. It is essential to choose the right insurance for your needs, and by avoiding these common misconceptions, you can ensure that you are not underinsured.