How do I know if I am underinsured? Should I have had something like Consumer Credit Insurance (CCI) in place before Covid 19 hit? Would this type of insurance cover my mortgage and Credit card repayments in this crisis where my hours have been significantly cut?
Jamie in North Lakes, QLD
Top answer provided by:
Thank you for your question.
Underinsurance is a problem faced by many Australians with less than half of the population having enough cover to provide their family with the same standard of living should they pass away.
The best way forward would be to sit down with a financial planner that specialises in risk protection strategies and then you can work out exactly how much cover you need for different scenarios such as Death, Total and Permanent Disablement (TPD) or when you are unable to work due to illness or injury.
There are many things to consider and discuss when working out how much insurance you should be insured for. I have listed some of these below:
1. Debt Commitments
2. Annual Income
3. Future education costs for dependants
4. Living expenses
5. Any existing insurance (many people have insurance within superannuation they were not aware of)
Consumer Credit Insurance (CCI) would have been offered to you by your lenders when you took out your credit card and mortgage. It provides cover for consumers if they are unable to meet their minimum loan repayments due to unemployment, sickness or injury or to pay the outstanding loan balance upon death. Potentially this may have covered some of your debt repayments but may only provide assistance if you had lost your job altogether. You may need to ring a provider to find out more information on this. However, due to the Covid-19 pandemic, many lenders are being very considerate of customers circumstances and their ability to meet their loan repayments.
The first thing I would do would be to get in contact with your credit providers and see what assistance they can offer for your debt commitments until you return to normal working hours. The good news is the banks have been very understanding and are offering a number of remedies at this time.
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