The median life insurance cover held by Australians is only around $143,500 – which is about twice the median house-hold income, according to recent research from actuarial consultancy, Rice Warner.
In an assessment relating to Rice Warner’s latest Underinsurance in Australia report, the company pointed to the importance of insurance inside superannuation in circumstances where Australia continues to suffer from an underinsurance gap.
Referencing its Underinsurance in Australia 2017 report, Rice Warner said a key highlight was that the underinsurance gap remained significant for Australia’s working age population, using updated Census data and adjusting for dependent adults such as students living at home, who had little need for life insurance.
It said the amount of insurance cover Australians held varied considerably between individuals and could be significantly less than their insurance needs.
“It is estimated that 94 per cent of working Australians have some level of life cover with an average cover amount of approximately $344,500, which is around four and a half times median household income,” the report analysis said.
It said the high proportion of insured members demonstrated the tremendous progress made by the life and superannuation insurance industries in meeting a growing proportion of basic life insurance needs, through developments such as compulsory default insurance cover within superannuation and the increased focus on risk insurance by financial advisers.
However, it said that the average levels of cover could be misleading as they were skewed by a relatively small proportion of the population (typically those on relatively high incomes with active financial advisers) that had high levels of cover.
“For this reason, the median level of insurance cover is more appropriate when measuring the insurance cover held across Australia,” it said. “For those who have life cover, the median cover level is estimated to be approximately $143,500, which is only twice the median household income.”
The results of significant underinsurance not only restrict the lifestyle the claimant and their dependants can enjoy after an unfortunate event, but also incur substantial cost to government mainly in the form of social security benefits.