By Craig Phillips
Australians have a much greater shortfall in the level of life insurance they take out than most other comparable countries, a new study has found.
Commissioned by insurance group Swiss RE, the Sigma study found there was a 39 per cent shortfall between the life insurance cover Australians have, and the cover they need.
The study found Australia lags behind the US, Taiwan, Germany and Italy, which had shortfalls of 29 per cent, 24 per cent, 36 per cent and 24 per cent respectively.
According to the study, the average working Australian with dependents has an additional protection need of $184,000.
Australians would have to pay an extra $460 a year for life insurance cover — an increase of 109 per cent — to meet the shortfall.
The findings come despite the individual term insurance market in Australia growing 9.8 per cent between 1998 and 2002, after benefiting from a shift in consumer preference to buying mortality protection separately from investment.
“The shift resulted from the declining popularity of whole life and endowment products because of concerns about their inflexibility, lack of transparency and poor investment returns,” the Sigma study says.
The report argues the basic financial needs of many families remain unaddressed, with those who are young or less affluent particularly vulnerable to a drastic decline in living standards in the event of the household primary earner’s death.
