Debunk some common myths about life insurance

by Andrew Newman
in Insurance
1 Jul 2010 | 0 Comments

Many people wouldn't think twice about insuring the full value of their car or home. But when it comes to life insurance, 60% of families with dependant children do not have enough insurance to cover household expenses for a year if the family breadwinner was to die. See Note 1

Even today with an over-abundance of information available, people are still relatively uneducated on the topic of insurance. They believe they have enough insurance in their super, they don't need insurance or think it's just too expensive. Isn't it time to debunk some of these common myths?

Despite the fact that almost every working Australian has some life insurance within their superannuation, Australia has proved to be one of the most underinsured nations in the developed world. See Note 1

Take a look at these statistics:

50% of individuals are underinsured by $100,000 for life insurance. See Note 2
74% of individuals are underinsured by $100,000 for Total and Permanent Disability (TPD) insurance. See Note 2
45% of individuals are underinsured by $1,000 per month for income protection insurance. See Note 2
Australian families with dependant children need life insurance between the value of 10 to 13 times the combined annual income. See Note 3
Only 4% of Australian families with dependant children have adequate levels of insurance cover. See Note 3
The default amount of life insurance in super is on average only 20% of what is actually needed. See Note 3

It's quite a serious situation considering:

81% say life insurance is too expensive, however 61% overestimate the cost. See Note 4
41% say life insurance is too complicated and 1 in 4 don't know where to start. See Note 4
More than 50,000 people were hospitalised due to transport accidents with over five days in hospital (81% of these were of working age). See Note 5
Over 1,400 people die on Australian roads every year. See Note 6
More than 3 in 4 Australians will be diagnosed with a serious illness in their working life. See Note 7
1 in 3 women and 1 in 4 men will suffer cancer at some stage in their lives - over 1/2 of whom will live for longer than 5 years after diagnosis. See Note 8

When you consider these sobering statistics, there's really no excuse to not put protection first.

Did you know?

Wealth protection is an integral part of any wealth creation strategy. Because no two people are the same, there are a selection of protection products that can be tailored to suit your individual needs.

Note 1 IFSA/TNS Protection Gap research, 2005
Note 2 AIST Media Release, Tuesday 3rd June 2008
Note 3 Analysis of Insurance needs - Rice Warner Actuaries, May 2005
Note 4 ING Australia's Attitudes Towards Life Insurance, December 2008
Note 5 AIHW Injury Research and Statistics Series No. 42, 2005-06
Note 6 Australian Government, Road Deaths Australia 2008
Note 7 ABS Statistics, 2007
Note 8 Cancer Council: (www.cancer.org.au), Cancer in Australia: an overview, 2008 Australian Institute of Health and Welfare (published December 2008)

The above information has been sourced from Norwich Union Life Australia Limited.

If you would like to secure the financial future for you and your family, then I urge you to have your insurance cover reviewed.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and I recommend you seek financial advice.

Debunk some common myths about life insurance

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