Millions at risk from underinsurance
Only four per cent of Australian parents have enough life insurance cover to sustain their family’s lifestyle if either parent were to die, with 60 per cent - or 5.4 million families - unable to see their loved ones through even the first year after their death.
These are amongst the key results of research conducted by Rice Walker Actuaries and TNS for the Investment and Financial Services Association (IFSA), which also found even people who had sought financial planning advice were underinsured, with just 17 per cent having adequate cover.
TNS consultant Gary Lembit said adequate cover for an individual in a family situation was usually between 10 and 13 times the person’s annual income.
The study found only four per cent of all Australian families had this level of cover and nationally the shortfall in insurance was more than $1,370 billion.
Lembit said the research had also uncovered gaping holes in consumers’ understanding of and attitudes towards life insurance.
Only 40 per cent of full-time workers were aware that life insurance cover could be obtained through superannuation funds or knew the level of cover they personally had.
The majority of people surveyed understood life insurance was beneficial and knew it aimed to protect their family in the event of their death, but many thought only in terms of expenses such as funeral costs.
“The amount of cover you’re going to take out is going to be quite different if your focus is on the need to cover expenses in the short term versus actually thinking about the ongoing lifestyle of the family left behind,” Lembit said.
Despite this, the research showed 23 per cent of people thought they were very well covered and most people thought their level of cover was reasonable.
Lembit said people had insufficient insurance due to perceptions that it was too expensive and too difficult to obtain.
He said only 42 per cent of people who did not have life cover could see its relevance for their family and 20 per cent thought life insurance related to financial management.
Of those who had adequate cover, 80 per cent thought it was beneficial for them and 58 per cent saw it as part of their general financial management.
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