Only half of Australians have life insurance
Life and total and permanent disablement (TPD) underinsurance is costing the government around $1.3 billion annually, with only half of Australians currently insured.
That's according to the CommInsure Life Insurance Survey, an online study conducted by Newspoll in November which examined the responses of 1220 Australians aged between 18 and 64.
Based on their attitudes towards life cover, the data revealed that while 70 per cent of respondents knew someone who had suffered significant physical or mental trauma, only 56 per cent of the respondents had life insurance.
Younger Australians (aged 18-24) demonstrated the highest levels of underinsurance, with just 36 per cent holding life cover. This figure then rose to 63 per cent for 25-34 year olds, and dropped to 53 per cent for those aged 50-64, the report found.
Divergence in the number of Australians actually holding cover is evident when comparing households, with 36 per cent of lower-income individuals (income less than $40,000) holding life insurance, compared with 70 per cent of those earning above $80,000.
Referring to Rice Warner's Underinsurance in Australia Research Report 2011, CommInsure general manager of retail advice Tim Browne said that Australians were underinsured by $3.1 trillion. He said a large number of Australians may have to rely on government support if an unforseen event were to occur.
"This is a dire state of affairs given the average payout (government support) is less than $350 per week, compared with an average weekly income for working Australians of $1,322," he said.
Across all age groups, CommInsure's data found that respondents were more likely to have life insurance through superannuation only, rather than hold it separately.
This finding comes on the back of research (Financial Services Council-KPMG 2006-08 Lump Sum Risk Experience Investigation) which found that insurance paid outside of a super fund is nearly double that paid by an employer default fund.
Furthermore, only 18 per cent of participants with life insurance through their super fund had increased their cover beyond the default level, with 71 per cent of younger Australians (aged 18-34) more likely to opt for the default compared with 63 per cent of 35-49 year olds and 60 per cent of 50-64 year olds.
Based on the findings, Browne believes most Australians are underinsured because they either don't believe they can afford to increase their level of cover beyond the default (56 per cent); they already have adequate cover through their super (50 per cent); or insurance is not a priority (46 per cent).
Meanwhile, almost 60 per cent of respondents with a super account are not aware that they may have life insurance through the fund.
"Whilst insurance within super is a good safety net, it may not be enough for individual circumstances and consequently could be placing the individual or family at risk," Browne said.
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