Life insurance: the future
Life insurance can help protect the future of those who matter most to you - your family. Life Insurance can provide the financial means to allow your family to help maintain the way of life you provided, should the unexpected happen.
Your income and the ability to earn an income are generally considered to be your greatest assets. So it makes sense to protect them, just as you protect your car and your home. Yet, when it comes to health and income research consistently shows that Australians do not hold adequate levels of insurance to protect themselves and their family. Research commissioned by Investment and Financial Services Association (IFSA) in 2005 showed that people with dependants were underinsured by $1.37 trillion. 1
Protecting your future...
Nearly 2.5 million families face financial hardship when a parent passes away, and on average only 4% of Australians have enough life insurance cover to meet their needs.2
Life insurance claims figures released by IFSA show that in 2008 Australian families received an average insurance payout of just $91,000 on the death of a partner. Average payouts for total and permanent disablement for the same period sat at $71,000 and for trauma insurance $155,000. 3 Given the average family with young children has debts totalling $167,000 4 these claims payments would not protect the majority of Australians from financial difficulty.
So no matter what stage of life you're at, life insurance could help to protect you and your loved ones in the event of death, critical illness or permanent disability.
The reality is, it could happen to you
It's not something we like to think about. But there is a chance that it could happen to you. More than four in 10 Australians who have a heart attack will die within a year. More than half of these deaths occur before the person can reach a hospital for treatment. 5
So why do people fail to take out life insurance?
- Insurance inside super will cover me - Unfortunately this is not always the case as the minimum levels of cover provided in super funds are generally/usually set with all members in mind and the level of cover doesn't take into consideration your individual financial situation or needs. It's important to check the cover that you have in your superannuation arrangement to make sure that it is sufficient for your needs.
- The government will look after us if I get sick or injured - Whilst Centrelink may be available would the amount paid be sufficient to replace lost income? Figures show that Centrelink currently pays a maximum disability pension of $569.80 per fortnight to eligible/qualifying singles and $475.90 (each) to eligible/qualifying couples.6
- Life insurance is too expensive - For most Australians life insurance can be affordable For example, $500,000 life insurance cover for a 35 year old male, non-smoker could be bought for approximately $30 per month7
What should I consider when considering an insurance provider?
Your insurance needs will ultimately depend on your income, debts and lifestyle so it's important to make sure you are getting the cover you need and at a price you can afford - shop around, as the insurance industry is highly competitive. And, check that the policy provides flexibility and can be adjusted to meet your changing needs - remember it's important to read the Product Disclosure Statement (PDS) as it fully describes the product, its benefit and any limitations.
The information in this article is about life insurance and related products generally and not a specific product.
1IFSA - Cost of Underinsurance Project, Assessment of
Financial Needs, Rice Walker Actuaries May 2005.
2IFSA TNS Consulting and Rice Warner Actuaries, 2007
3IFSA - $91,000 not enough to cover lost life - Australians encouraged to become Lifewise, April 2009
4For Australian families with children under the age of five, the median amount of debt is $167,000, ABS, Australian Social Trends, Household Debt, cat. No.4102.0, 2009.
5Australian Institute of Health and Welfare (AIHW), 2001. Heart, stroke and vascular diseases: Australian facts 2001.
6Centrelink website. Rates are a guide only and are effective from 20th March 2009.
7IFSA analysis based on APRA data and Risk Store data 2007.
The information contained on this website is general information only. It does not take into account your individual objectives. financial situation or needs. You should therefore consider the appropriateness of the insurance having regard to your objectives, financial situation and needs. Prior to making any decision about an insurance product you should read the Product Disclosure Statement (PDS) for it. If you require assistance to determine if an insurance product suits your objectives, financial situation and needs then you should seek advice from your financial adviser.