Life Insurance in Australia – the true cost of insufficient insurance cover

A recent survey conducted in Australia found that only 4% of Australians with dependants have sufficient life insurance (IFA – Rice Walker Fast Facts: A nation exposed!).  This is an extremely worrying statistic and has the potential to greatly impact upon the financial livelihood of families who aren’t sufficiently covered if one or both parents were to die.  “Sufficient” life insurance is generally accepted to be at least 10 times the insured’s earnings.  Alarmingly however, 60% of people with dependants don’t have enough life insurance cover to look after their loved ones for more than one year if they were to pass away.  These alarming figures could be due to a lack of awareness about the types of life insurance policies available and the cost of purchasing cover.  Many people insure their home and car, but fail to insure their most important asset – their ability to produce an income.  People fail to realise the value of their ‘working’ life.  It supplies the money that fuels the lifestyle that you and your family enjoy, not just now, but well into the future.

Income Protection is one type of life insurance that is designed to replace your income and contribution to your household income.  The following table demonstrates just how valuable an asset your ability to produce an income really is.  It shows you your potential earnings over 20 years and takes into account annual inflation increases (3% pa) and pay increases (3%).  The table represents your gross income accumilating over time:

Even an income of $30,000 today is potentially worth more than $1,000,000 in 20 years time.  Imagine no longer having access to that potential income – through injury, illness or death – which is so vital to you and your family.

There are many insurance products available in Australia that come under the ‘life insurance’ umbrella:  income protection, term life insurance, trauma insurance, total and permanent disability (tpd) insurance, the list goes on.  Understandably, trying to evaluate the best life insurance product to protect your family can be daunting.  We encourage you to seek professional financial advice from an experienced financial planner to assist you in choosing a life insurance policy and for regular reviews to ensure that any current life insurance policies you have are still suitable for your needs.  Life changes such as marriage, the birth of a child, or purchase of a house all impact on your life insurance needs.


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