Income Protection Gap Threatens Homes
An inability to earn income could risk many priorities in life and in as short as three months, even homes, a major investment, may be threatened.
A 2012 Life Risk Survey by CommInsure revealed that..
- 39% would resort to mortgage or remortgage
- 32% would choose downsize their homes
- 28% would opt to live with other people (blood relation or friends)
Without IP (income protection) cover, the risk is higher. Of the 34% of the respondents who hold IP cover, half of it had it inside their super fund while no more than 20% said they had increased their cover. The rest were unsure whether or not they have income protection.
Tim Browne, general manager of CommInsure’s Retail Advice said it is an Australian “savings culture” but that puts them at great risk in case something goes wrong to a family’s main source of income.
The survey reiterated the “savings culture” as respondents were asked what they’d do in case an unexpected money worth $1,500 is given to them.
- 39% would put it in their savings
- 37% would use the money for bills payments
- 2% would take out an insurance
- 1% would increase present cover
The amount represents an average yearly insurance premium worth $1 million for a non-smoking 40-year-old male.
Browne believes many Australians think they have proper coverage through their super hence they tend not to top up or seek expert advice. This often leaves the family unprepared when faced with financial difficulties.