Huy Truong: why are the majority of mortgage holders uninsured?

ALI Group CEO on whether mortgage holders are too optimistic or simply unaware when it comes to protecting their most important asset, themselves.

83% of car owners have motor vehicle insurance1. 71% have contents insurance2. Yet, only 11% of mortgage holders, aged 20-49, have any form of loan protection should their income suddenly stop because of serious illness or injury3.

Why are we so protective when it comes to our possessions yet so lax when it comes to ourselves?

A common explanation lies in Australia’s carefree attitude – ‘she’ll be right, mate’.

We tend to be overly optimistic, or perhaps have our head in the sand. Research by Zurich4 shows that 47 percent of respondents believed they had a less than 10 percent chance of lost earnings due to illness or disability.

In reality, the odds are against us. 

•    Every four minutes in Australia, someone hears the words “you have cancer”5
•    1 in 5 parents will become seriously ill, are injured or even die before they’re due to retire6.

This attitude is not surprising. It’s not easy or pleasant to confront the realities of job loss, serious illness or death.

Research by Asteron Life and TAL7, highlight that buying a home or property is the second highest trigger (after having children) for taking out life insurance. 

This raises the question, does the lack of information and access to affordable cover contribute to underinsurance?

The good news is that in either situation, mortgage brokers are perfectly placed to inform and protect. They can do so by addressing loan serviceability, highlighting the risks and providing their clients with options to protect themselves at a time when they are most receptive.

Unfortunately, many mortgage brokers still don’t think it’s within their service model to have the risk discussion – not realising that in most cases, no one else will. 

We often don’t like to contemplate what can go wrong, yet in the same token, there are moments when we will raise our head out of the sand when prompted to consider the risks, and a new mortgage is one of those moments.
Yonni and his wife highlight the importance of mortgage brokers having the risk discussion with their clients.

Yonni and his wife saw a mortgage broker when they purchased their first home together. Serious illness was the last thing on their mind, however, their mortgage broker discussed the importance of having a Plan B and helped them put in place a policy for $400,000 cover8
Sadly, Yonni’s wife passed away from breast cancer earlier this year, she was only 32 years old. The risk discussion they had with their mortgage broker eight years earlier proved to be a saving grace.

“It has allowed me to grieve without the fear of losing our house which was filled with so many wonderful memories.  The funds have paved a way for a future filled with hope and not stress.

It also allowed Anna to receive vital medical treatment and gave me the opportunity to care for her.  This year with her passing I would not have known what I would have done if I had the added burden of an uncertain financial future.

The only predictable thing about life is its unpredictability.  Taking out this policy and renewing it every year provides such a sense of freedom to grieve and move on with life.” 

It’s not easy to contemplate death and serious illness, yet in the right moment, with someone we trust, it’s so important that we do. 

A new mortgage… with a trusted mortgage broker… is one of those moments.

Huy Truong is CEO of ALI Group, a leading provider of loan and mortgage protection to Australian home and property buyers – with almost $42 billion provided in cover and almost $65 million paid out in claims. Currently, there are over 3,500 brokers authorised to offer ALI Group’s loan and mortgage protection.

1.    Lifewise. Industry facts page. 
Tooth (2015). Insurance Council of Australia: Analysis of demand for home and contents
3.    Roy Morgan (2016). Single Source.
4.    Zurich (2016). Income protection gaps: Challenge and opportunity. 
5.    Australian Institute of Health and Welfare (2017). Cancer in Australia 2017. 
6.    Lifewise (2010). The Lifewise/NATSEM Underinsurance Report: Understanding the Social and Economic Cost of Underinsurance.
7.    Canstar (2015). Kids Prompt Australians To Buy Life Insurance.
8.    Real life ALI Group policyholder and testimonial.