What would happen if you couldn’t work tomorrow?

It’s a question that many people avoid, but one that can have serious consequences. Most Australians insure their homes, cars, and possessions without hesitation. Yet the ability to earn an income - which for most people is their largest and most valuable financial asset - often goes uninsured or underinsured.

Personal insurance is about more than money. It’s about peace of mind, family security, and ensuring that your goals and lifestyle are not derailed by the unexpected. In a world where financial resilience is increasingly important, personal insurance deserves a central place in every financial plan.

Why Personal Insurance Matters More Than Ever

Underinsurance in Australia

Australia has one of the highest rates of underinsurance in the developed world. According to research by Rice Warner, the median level of life cover held by working Australians meets less than half the needs of the average family. The gap is even wider for income protection and TPD insurance.

This means that in the event of illness, injury, or death, many families would struggle to pay their mortgage, cover school fees, or maintain their standard of living. Without adequate protection, long-term goals such as retirement planning or wealth transfer to the next generation may never be realised.

Wealth Protection vs Wealth Creation

For years, financial planning conversations have focused heavily on growing wealth through investments, superannuation, and property. While this is critical, growth strategies only tell half the story. Protecting that wealth is just as important. Without insurance, the wealth you’ve carefully built can unravel quickly when life doesn’t go to plan.

Think of insurance as the seatbelt of your financial strategy. It won’t stop an accident from happening, but it can prevent a temporary setback from becoming a devastating, irreversible event.

Financial Resilience

Over the past few years, Australians have become increasingly aware of financial resilience. Rising living costs, higher interest rates, and global uncertainty have highlighted the importance of having buffers in place. A solid financial resilience plan includes emergency savings, sensible debt management, and yes - insurance.

Insurance provides the financial back-up that savings alone often cannot. Few families have the ability to self-fund years of lost income or cover large medical expenses without assistance.

The Four Pillars of Personal Insurance

At Arrow, we view personal insurance through four key pillars. Each addresses a different risk and, together, they provide comprehensive protection for you and your family.

1. Life Insurance

What it covers: Provides a lump sum if you pass away or are diagnosed with a terminal illness.
Why it matters: This payout can cover debts, replace income, fund children’s education, or simply allow your family the time and space to grieve without financial stress.
Example: A 40-year-old parent with a $600,000 mortgage and two school-aged children may need sufficient cover to clear the debt and provide for education expenses - often well over $1 million in protection.

2. Income Protection Insurance

What it covers: Pays up to 70% of your income if illness or injury prevents you from working.
Why it matters: Income protection ensures you can continue to cover living expenses, mortgage repayments, and bills while you recover.
Tax benefit: Premiums are generally tax-deductible, although payouts are treated as taxable income.
Example: A professional earning $120,000 annually who suffers a serious injury could receive $84,000 per year (before tax) through income protection, helping maintain their household’s financial stability.

3. Trauma (Critical Illness) Insurance

What it covers: Provides a lump sum on diagnosis of certain serious illnesses such as cancer, heart attack, or stroke.
Why it matters: Trauma insurance gives you financial flexibility at a critical time. It can fund medical treatments not covered by Medicare or private health, allow one partner to take time off work to provide care, or enable lifestyle changes to support recovery.
Example: If diagnosed with breast cancer, a lump-sum payment of $200,000 could help cover treatment costs, reduce work hours, and manage household needs during recovery.

4. Total and Permanent Disability (TPD) Insurance

What it covers: Pays a lump sum if you become permanently disabled and unable to work.
Why it matters: This protection helps secure your financial future when returning to work is no longer possible. It can fund modifications to your home, pay off debts, and ensure ongoing income for your family.
Example: A tradesperson permanently injured on-site may need funds to retrain for a new occupation or support their family for the rest of their life. TPD cover provides this crucial financial support.

How Insurance Protects You in Real Life

Maintaining Your Lifestyle

Insurance ensures that day-to-day living standards are maintained even if income stops. Bills can still be paid, groceries bought, and children supported.

Protecting Your Family

The emotional toll of a serious illness or death is hard enough. Insurance ensures financial hardship doesn’t compound the stress, providing dependents with security and stability.

Buying Time to Recover

Whether you’re recovering from surgery, undergoing cancer treatment, or adapting to life after an accident, insurance reduces financial pressure so you can focus on your health.

Keeping Long-Term Goals on Track

Without protection, long-term financial goals such as retirement planning, funding education, or leaving a legacy may be derailed. Insurance ensures those plans remain intact.

Common Misconceptions About Personal Insurance

“I’m young and healthy, I don’t need cover yet.”
Unexpected illnesses and accidents can happen at any age. Younger individuals often benefit from lower premiums and guaranteed insurability.
“My superannuation cover is enough.”
Default cover in superannuation is usually minimal and often excludes important protections like trauma insurance.
“It’s too expensive.”
The real question is: can you afford not to be covered? The cost of being uninsured during a crisis is almost always higher than the cost of premiums.
“Government benefits will cover me.”
While Centrelink provides some support, it is generally not sufficient to maintain a family’s lifestyle or meet ongoing commitments.

Reviewing Your Cover

Insurance isn’t a “set and forget” strategy. Your needs change as your life evolves - new career, children, a bigger mortgage, or business ownership all require reassessment of cover. It’s important to review your policies regularly to ensure they align with your current lifestyle and financial goals.

At Arrow, we believe insurance should be tailored, not generic. The right structure and level of cover depend on your income, debts, family situation, and long-term goals.

Final Thoughts

Personal insurance may not be the most exciting part of financial planning, but it is one of the most important. It provides a safety net that ensures the wealth you’ve worked hard to build is not lost to unforeseen circumstances.

By protecting your ability to generate income, securing your family’s financial future, and reinforcing your long-term plans, personal insurance offers peace of mind that no investment portfolio can match.

General Advice Warning:
Any general advice on this page does not take account of your personal objectives, financial situation and needs, and because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. Information contained on this page was correct at the time of posting.