Life insurance tipped to go as householders rein in costs
The current underinsurance crisis is forecast to worsen, as life insurance policies become a casualty of tighter household budgets, an academic believes.
While the Australian Bureau of Statistics already estimates an $800 billion underinsurance problem in Australia, Deakin University financial planning and superannuation senior lecturer Dr Adrian Raftery the situation is likely to deteriorate further following the recent Federal Budget.
He suggested a tax drop on life insurance premiums to counter the trend.
“Whilst life insurance is a necessity, sadly most view it as a luxury item and will cancel it, or let it lapse, at first opportunity when cash flow gets tight,” Raftery said.
“We are already underinsured as a nation, so we want to encourage people to take out cover rather than give them opportunities to opt out,” he said.
The academic also called for education programs and campaigns to inform Australians about the minimum level of life insurance required to meet their needs.
“At an absolute minimum, families should have cover to the equivalent of their current mortgage commitments,” he said.
“They should also be encouraged to take out an additional amount as a buffer to fund children’s education and lifestyle benefits, such as holidays and personal effects.”
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