Life insurance – are you underinsured?

It’s no secret that not enough Australians hold life insurance, and recent research demonstrates that most are underinsured. 

Under insurance was highlighted back in 2013 when research from life insurance provider TAL found only 30%-37% of Australians aged 18-69 held life insurance. Only 11-18% held disability cover, income protection insurance, or critical illness and trauma cover.

However, it turns out that even for the few Australians that hold life insurance, we are still hugely underinsured – to the tune of $1,811 billion, according to new research from Rice Warner.

This is made up of under insurance in the main life insurance “categories”:

  • $57 million per year for life insurance
  • $1,258 million per year for total and permanent disability (TPD) cover
  • $260 million per year for income protection

The table below shows some of our best life insurance options available for a non-smoking female aged 30-39 years old, who is working in a white collar occupation group such as a clerk or office administrator. This table is sorted by Star Rating (highest to lowest).


Planning ahead before starting a family

The news is slightly better for those without children, who are covered for about 60% of their requirements.

But the Westpac Women Insurance Survey revealed that 60% of women do not have life insurance, and many did not plan to buy life insurance cover before beginning a family.

What’s more, Australian women were half as likely as men to search for insurance. 70% of life insurance enquiries in 2013 were made by men, according to RiskInfo.

As we know, the birth of a child is the number one prompt for these enquiries into life insurance, with buying a home the second most common reason.

Unfortunately, it doesn’t make sense for women to avoid getting life insurance. A 45-year-old woman is 94% more likely to make a disability insurance claim due to sickness than a man of the same age, according to statistics from the Financial Services Council and KPMG.

Life insurance – are you underinsured

Life insurance through super is helping to fight under insurance

All of this (slightly disheartening) news aside, it’s a fact that mandatory super has led to a huge boom for the Australian life insurance industry. Group insurance schemes (which involve bulk buying insurance policies for super funds, workplaces, societies, etc.) are spending nearly $5 billion in premiums, which represents a 900% increase in spending compared to 20 years ago.

If you have superannuation, it’s important that you check your built-in life insurance, and determine whether or not the provided level of cover is sufficient for your financial requirements. If not, you should consider looking into taking out a policy for yourself to avoid any financial crises down the road.

You can compare life insurance policies online at CANSTAR, including income protection insurance, critical illness and trauma cover, and disability cover.

Compare Life Insurance

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