Australians falling short of adequate insurance

Australian workers are falling far short of the amount necessary to be adequately insured in the event of the death of a partner, with an average payout of just $91,000, according to a new survey on life insurance released by the Investment and Financial Services Association (IFSA). The survey was based on information from more than 90 per cent of the market.

The average debt for a family with children under five totals more than $167,000, outstripping the average payout by $76,000, according to figures from the Australian Bureau of Statistics. IFSA deputy chief executive John O’Shaughnessy said that this average payout would not protect most Australians from financial problems on the death of a partner.

More than $2.3 billion in claims were paid in 2008 on nearly 35,000 policies.

Payouts for total and permanent disablement in 2008 were little better, with an average payout of $71,000 in the event of an accident, far short of what is needed in home modification costs and living expenses, O’Shaughnessy said.

The survey also found less than 10 per cent of Australians take up trauma insurance, despite an average payout of more than $155,000.

“The average size of claims paid shows Australians continue to be underinsured, adding further pressure to working families already strained due to the financial crisis and economic recession,” O’Shaughnessy said.

IFSA is launching the Lifewise campaign today to encourage Australians to take out adequate insurance.