When we talk about personal finance, most conversations revolve around budgeting, saving, investing, and maybe a bit about taxes. Rarely, however, do people bring up one of the most critical pieces of financial protection: insurance. More specifically, being underinsured. It’s not as flashy as picking the next growth stock or talking about passive income, but failing to have the right coverage—or enough of it—can undo years of financial progress in a matter of hours.
For many young professionals and beginner investors, insurance feels like something for “later.” But unexpected events don’t wait for the right moment. A medical emergency, a car accident, a house fire, or even a legal liability can instantly change your financial reality. And if you’re not adequately insured, the cost won’t just be emotional—it will be financial, too.
Why Underinsurance Happens (and Goes Unnoticed)
Underinsurance doesn’t mean having no insurance—it means having insufficient coverage to fully protect you from the financial impact of a serious event. And it’s more common than most people think.
A 2023 survey from Insurance Europe found that nearly 40% of EU households are underinsured in at least one critical category, especially in health and income protection. In Italy, for instance, only about 20% of families have private health insurance coverage, despite rising out-of-pocket medical expenses and long public waiting times.
Why does this happen? A mix of overconfidence, misinformation, and a general perception that “bad things happen to other people.” There’s also a widespread lack of financial education around insurance—what’s essential, what’s optional, and what it really means when something goes wrong.
The Hidden Financial Impact of Being Underinsured
Imagine this: you’re a freelancer or young professional who’s just started investing. You’ve built a small portfolio worth € 10,000, and you’ve got a solid emergency fund. Then you get injured and can’t work for three months. If you don’t have income protection insurance or a disability policy, your savings start draining fast. Your investments may have to be sold early, possibly at a loss. And the financial momentum you worked so hard to build disappears.
Or let’s say you’re in your late 20s or 30s and rent an apartment. You may assume your landlord’s insurance covers you in case of theft or fire. It doesn’t. Without renters’ insurance, you could lose everything in a single incident—with no compensation.
Even health insurance can be deceiving. In countries with public healthcare systems, like Italy, people often assume they’re fully covered. But in reality, dental care, specialist visits, and private surgeries are often excluded or heavily delayed—leading many to pay out of pocket or go into debt.
How to Assess and Address Your Coverage
You don’t need to insure every aspect of your life—but you do need to protect what you can’t afford to lose. That includes your income, your health, and any assets you’re starting to accumulate.
Here are a few key areas often overlooked:
- Income protection: Especially important for freelancers, gig workers, or anyone without paid sick leave. A basic policy can cover 60–70% of your income for a period of disability or illness.
- Private health insurance: In Italy, policies often start from € 300 – € 500 per year and can give you access to private clinics, faster diagnostics, and specialist care—useful even if you rely on the public system.
- Personal liability insurance: One of the cheapest but most overlooked protections. If you accidentally injure someone or damage property, liability coverage can save you from lawsuits or large settlements.
- Renters or home contents insurance: For just a few euros a month, you can cover theft, fire, or water damage to your personal belongings—crucial if you’re just starting to furnish a place or own valuable electronics.
- Travel insurance: Particularly relevant post-pandemic. With flight cancellations and health risks abroad, comprehensive travel coverage is a smart move for even the occasional traveler.
Making Insurance Part of Your Wealth Strategy
Insurance isn’t just about avoiding financial ruin—it’s about protecting your ability to build wealth. It allows you to take calculated risks in your career, your investments, or your lifestyle, knowing that worst-case scenarios won’t wipe out your progress.
It’s also an emotional safety net. The peace of mind that comes from knowing you and your loved ones are protected is priceless—and often costs less than a streaming subscription per month.
Building wealth is about more than growing assets. It’s also about limiting potential losses. Just like diversification protects your investment portfolio, insurance protects your financial life from tail risks you can’t control.
Protect What You’re Building—Before It’s Too Late
Being underinsured isn’t a problem you notice until it’s too late. And by then, the damage can be severe. That’s why reviewing your insurance coverage—even briefly—is one of the smartest money moves you can make this year.
You don’t need to buy every policy on the market. But you do need to ask yourself: if something happened tomorrow, could I afford the financial consequences?
If the answer is no, don’t see insurance as an expense—see it as protection for your financial future. After all, building wealth isn’t just about growing—it’s about preserving. And that’s where insurance plays a role no investment ever can.
