Many Australians are frighteningly under insured. Avoid being part of the statistics by assessing your insurance need adequately.
The day you’ve been waiting for has arrived: your brand new car is ready to take home. The first thing you do before driving it out of the lot is ensure you have insurance. There’s no way you’ll risk anything happening to your new car!
Most of us don’t think twice about insuring our possessions, but what about protecting the most important asset – you? If you were in an accident and couldn’t work, how would you and your family afford your medical bills on top of your mortgage and daily expenses?
96% of Australian families lack enough life insurance to protect their families for 10 years or more, according to a study by the Financial Services Council. So, for young families, this underinsurance trend can be quite devastating.
- Australia’s insurance gap equates to $1,370 billion.1
- 6 out of 10 Australian families with dependent children do not have sufficient life insurance to look after their loved ones for more than one year if they were to die.2
- Only 4% of families are adequately insured.3
How much life insurance do you need?
Average full-time workers (earning approximately $50,000 p.a.) in their mid-30’s with young children require cover equal to 10 to 13 times their annual pre-tax income, according to Rice Walker Actuaries.2 This, of course, will fluctuate according to age, income and lifestyle goals.
If your life insurance does not meet these requirements, then you are considered underinsured. If something were to happen to you or your partner your family may struggle to pay the bills.
If you’re unsure how much life insurance you have and whether it’ll meet your needs, it is definitely time to find out.
How much insurance do you have?
Many Australians already have life insurance through their superannuation fund, so that’s a good place to start looking. Check your statement or contact your fund directly to find out your current level of insurance. Also, find out if you have stand-alone life insurance.
Your spouse may have arranged the cover, or you may have forgotten about an old policy.
Once you’ve found out how much insurance you have, it is important you read your policy terms and conditions. You can then assess how much you are covered for and identify if you are underinsured.
My super cover is enough
Like many Australians, you may have discovered your only life insurance is through your superannuation. You may be surprised how little there really is. Studies conducted by Rice Walker Actuaries estimate the average insurance amount payable from superannuation is approximately $70,000.2 This amount is far from the average minimum required to be adequately protected. You may need to consider additional and separate cover to your superannuation cover to meet your life insurance needs.
What about the homemaker?
Some may think – ‘I’m a stay-at-home parent. I don’t need life insurance.’ What most families don’t realise, is if the homemaker wasn’t around, their family would require a lot of assistance – both emotionally and financially. If your household was to lose its homemaker, the effects on the primary breadwinner could be devastating. When a homemaker dies or becomes disabled, their partner is often left with limited options. They may have to reduce their working hours to look after the household, or employ outside help. Either option requires additional funds.
Families losing a stay-at-home parent may require more than $75,000 annually for child care and home help expenses.3
1 ‘ Fast facts: A nation exposed’, Financial Services Council (FSC), August 2005
2 ‘Analysis of Insurance Needs’, RiceWalker Actuaries, May 2005
3 ‘ Australian mothers – undervalued and underinsured’, Financial Services Council (FSC), October 2005