A new survey reveals that the majority of Australians either don’t have enough or don’t know if they have enough financial protection.
The survey – which interviewed 1,266 Australians from the ages of 18–69 and was conducted by Galaxy Research on behalf of TAL – revealed that more than half (56%) of respondents said they either don’t have suitable life insurance (33%) or don’t know if they have suitable life insurance (23%).
Conversely, 45% of people said they do have enough life insurance cover if they or their partner could not work again.
However, TAL Group chief executive Jim Minto believes Australians may be falling victim to false confidence about the adequacy of their life insurance given the nation’s well-documented huge underinsurance gap.
“I am surprised nearly half of the respondents felt they had enough cover because a lot of actuarial research shows they actually don’t. In our experience, a number of common misapprehensions can give rise to a false sense of security,” he said.
There are two common beliefs which lull Australians into a false sense of security, according to Minto.
“First, there is the mistaken belief that life insurance is a single, one-size-fits-all solution. It isn’t because every person’s and family’s circumstances are different, and different types of life insurance serve different purposes.
“Second, there is a belief that life insurance in superannuation automatically provides sufficient protection alone. Insurance through super has been fantastic for millions of Australians but unfortunately most people just retain the low, default level cover without assessing their personal needs.”
The research also shows more than two-thirds of people with just a single type of insurance – one out of the four forms of life insurance – subsequently believe that they have enough insurance overall.
“Often people seriously underestimate how much money they will need if they are unable to work again. The reality is most people need some combination of life, income protection, critical illness and total and permanent disability insurance. It can be a complex area, and we encourage people to ask for help so they can have the peace of mind that they have adequate cover rather than just hoping for the best,” he said.
Minto said Australians should be encouraged to check their life insurance at least once a year and a good rule of thumb for ensuring you meet the minimum requirement for life and lump sum disability cover is to have 10 to 15 times your annual salary.
The survey also revealed that younger people (aged 25-34) are more likely than their older counterparts to recognise that they don’t have enough insurance (46%), only 28% of those who rent say they have enough life insurance and those who believe they have enough insurance are more likely to have a high household income (53%), be mortgage-free (67%) and be married (49%).