But the reality is, though we won’t admit it. Luck plays a massive role, and no one is immune from health issues that affect your earning capacity and the financial wellbeing of your family members.
Yet in the nation of “she’ll be right”, Australians grossly under appreciate the need for life and disability insurance for when the proverbial hits the fan.
- Less than half of Australians have enough Life Insurance cover to provide the same standard of living for their families if they were to pass away.
- The average level of current covers meets only 29% of Total and Permanent Disablement of needs.^
- 35% of employed Australians do not have ANY disability insurance*
- The underinsurance gap is much greater for parents of young children^
- These underinsurance gaps are growing
But there’s the government Disability Support Pension, right?
It’ll look after me?
So good luck in the early retirement!
The Australia social security system can provide some relief to families who have lost their main income earner or for individuals who are no longer able to work to their full capacity. In many cases, it generally cannot maintain their standard of living. On the other hand, Life and Disability insurance provides households with meaningful payments to mitigate the impact of these life-changing events.
Life and Disability insurance provides a financial safety net and with this added financial security, enabling peace of mind. This outcome is an invaluable and tangible benefit.
So why do people not have enough cover?
The number of Australians purchasing life insurance has dropped since 2018 from 56% to 47%. According to an industry survey, 48% of respondents cited the perceived high cost of life insurance as the main reason for not having cover. #
According to a 2015 Insurance Barometer Study by LIMRA (a global insurance industry research organisation), 80% of consumers misjudge the cost of life insurance – Millennials overestimate the cost by 213% and Gen X by 119%. The reality is that life insurance can be highly affordable. According to Canstar research, a 40-year-old non-smoking Australian can obtain $500k of life insurance cover for between $40 and $80 a month.`
The negative publicity arising from the Hayne Royal Commission has led to the misperception that insurers avoid paying claims.
APRA data` shows that in 2020, for policies bought through a financial adviser, insurance companies paid out on average:
- 96.4% of Death claims
- 84.7% of Trauma claims
- 81.5% of TPD claims
- 94.0% of Disability Income Insurance (DII)
Insurance erodes retirement savings
Insurance provided through superannuation is generally a more cost-effective way for individuals to obtain life insurance due to premium discounts negotiated for group arrangements or tax deduction benefits. Further, the industry has worked with Government and regulators to implement measures to protect superannuation balances against erosion.
Contact your financial adviser today and secure your future!
^ Underinsurance in Australia 2020 report – Rice Warner
# Canstar (2019) – “Benefits of having life insurance: Is it worth the costs?”
` APRA (2020) – “Life insurance claims and disputes statistics”