Call for compulsory life insurance through super
A risk adviser has called for compulsory life insurance through superannuation for younger workers.
The Sherlock Group director Bruce Sherlock said there were too many cases of younger people being underinsured and partners being left in severe hardship when one of them dies or is disabled.
Sherlock has written to the Federal Government saying compulsory life insurance should be included in future changes to the superannuation industry.
He believes life insurance should be introduced as a compulsory measure from the beginning of a person’s working life until around the age of 45. Sherlock argues that later in life a person has paid off a considerable part of their mortgage and is starting to look towards superannuation to fund their retirement.
“The children are starting to go to university, they have paid off half or three-quarters of the mortgage, so they might only need to cover $250,000 to 300,000 of outstanding payments,” he said.
“I think there should be a mandatory minimum of six to 10-times annual earnings for full-time employees.”
For a young person applying for life cover, Sherlock said in most cases there would be no medical and with the tax deduction for the premium, they could be paying as little as $300 a year.
“The insurance would be provided through superannuation, with the option to refuse advice,” he said.
While there have been numerous attempts to educate the public about the merits of risk insurance, Sherlock admits a lot of these campaigns are still not hitting their audience.
Insurance levels, until very recently, have been at very low penetration, which he argues shows how few people think about risk insurance.
He said he sees people with a trauma that is fatal and the surviving partners receive a claim payment of less than $100,000, which is all the policy will pay.
“I would like to see compulsory life with the correct amount of insurance offered by both industry and retail funds,” Sherlock said.
“This would drastically reduce the pull on the public purse from families who have lost their breadwinner by allowing mortgages to be repaid and the surviving partner to retire in dignity.”
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