Are you one of 16 million underinsured Australians?
First, the good news. According to a recent report, an encouraging 92% of the working age population have Life Insurance. Given that Life Cover is a valuable tool to protect your family from financial stress, it’s a great start.
But if you dive a little deeper into the statistics from the Rice Warner ‘Underinsurance in Australia 2015’ report, it soon becomes apparent that many Australians don’t have enough cover. Less than half (42%) of Australians have enough Life Cover to provide the same standard of living for their families if they were to pass away. The underinsurance gap adds up to a staggering $1.833 billion.
The statistics show that around half of Australians who have Life Insurance don’t have enough.
In measuring underinsurance, Rice Warner looks at basic needs. That is, ‘the minimum required to pay all non-mortgage debt and sustain the current living standard until age 65 or until children reach age 21’. In fact, it is only 37% of your income. It’s not much. Could your family cope financially on just 37% of your income? If you still have a mortgage or other significant loans to pay, it could be very difficult for them to get by.
The research finds that the median level of Life Cover meets just 61% of basic needs. Given that most people take out Life Insurance for the peace of mind that their family’s finances will be looked after if they were to pass away, this tendency towards underinsurance is a worry. It means that those left behind will still be left with debts to pay – causing undue financial stress.
Why are so many underinsured?
A common cause of underinsurance is the fact that many people settle for the Life Insurance contained within their superannuation policies. Generally, super funds cover you for a lower amount of Life Insurance than insurers like Noble Oak.
It is a good idea to sit down and really think about how much Life Insurance you need to give your family financial peace of mind. Once you add up your debts and ongoing living expenses, you may discover that your current Life Cover doesn’t add up. Check out our Life Insurance Calculator if you need help calculating how much cover your family needs.