Secondary income earners underinsured

Couples or families relying on two incomes could hit dire financial straits if one income earner was unable to work, but many individuals in that situation aren’t adequately insured for such a situation.

A recent survey of consumers with life insurance who are married or in de facto relationships by MetLife found that 58 per cent wouldn’t be able to maintain their existing lifestyle for longer than two years if the secondary income earner couldn’t work.

Of insureds in relationships, 73 per cent had more than one income earner in the household. A significant number of secondary earners were casual or part-time workers, of which 48 per cent of women and 25 per cent of men were the parents of the dependents.

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The survey also found that these workers held lower levels of insurance than their full-time counterparts in all categories, as well as being less confident in explaining the various features of life insurance to a friend or colleague.

MetLife Australia head of retail sales, Matt Lippiatt, said that both these levels of underinsurance and the lack of preparation for losing an income were concerning giving how many households were dependent on second incomes.

“Particularly for families with children, if one partner is staying at home or working part-time, it can be just as important to insure them as it is the primary breadwinner,” he said.

“Consider, for example, the cost of finding appropriate childcare or the possibility of the main income earner having to reduce their working hours to help take care of children or a sick partner.”

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This problem is only going to get worse without any advisers to explain insurance to clients and set up a personalised plan with their best interests in mind. Who would choose to do all the extra insurance work for free? Only HNW clients who can afford the full advice fees will get insurance advice. Middle income clients arent going to pay the extra $2,000 odd fee to get advice and the majority will sort something (inadequate) out for themselves

Critical Illness insurance is so important for the lower income or non working spouse. If my wife got sick then i would stop work imediately to look after her and my family. My insurance wouldnt cover it and the only way our family could survive is with Critical Illness cover for her.

Removing commissions and forcing the majority of customers to the expensive direct (junk) insurance offerings and the Industry Super (junk) policies sold under general advice with no client protections is what is going to happen.

Of course the banks will be protected as their in house mortgage brokers will be able to sell ad on insurance (called mortgage protection) and still recieve a commission.

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