Life Insurance in Australia – Underinsurance Gap is Narrowing
Based on a report released by Rice Warner, the leading independent voice in the Australian financial services industry, underinsurance gap is seen narrowing. And this can be attributed mainly to the provision of default insurance provided by superannuation. This proved to be very successful in providing a more affordable life insurance cover, often without underwriting or medical check requirements, so getting a life coverage in Australia has become a lot easier than it was in the past.
Today, many Australians enjoy sufficient life coverage to meet their basic needs. However, there’s always room for much bigger improvement since the median level of life cover is only 66% of basic needs and 41% of the amount needed to ensure beneficiaries/dependents can maintain their standard of living in case of their parent’s or spouse’s death.
According to the report, life underinsurance, which is based on existing median levels of cover, is estimated at $2,166 billion as of June 2012. This is a whopping 30% reduction from that of two years ago which was $3,073 billion. So this only means that more family members and dependents can now maintain their standards of living even if their loved one, the policyholder, dies.
But the good news doesn’t end on life underinsurance. Disability insurance and income protection have also seen a rapid growth in the past years. For TPD (total and permanent disability), the level of underinsurance is estimated at $7,912 billion, and for income protection, it is $589 billion. These gaps are due mainly to the increasing population of those who are single yet needing greater financial support in the event they become incapable to work.
It’s really good to know that the insurance market has seen underinsurance narrowing gap in the past years. This only means that more Australians are now covered with life insurance, disability insurance, and income protection that they can truly rely on when the need arises.