Life Insurance Coverage Put at Risk by Superannuation
The number of Australians with life insurance coverage through superannuation has increased while there was a drop for the same number of people with stand-alone coverage, potentially worsening the insurance gap.
In 2006, the Financial Services Council said a similar study showed an increase in the number of Australians with superannuation life insurance coverage from 27 percent to 48 percent. In the same period, the Macquarie Life survey of 1000 showed a decline from 28% to 18% for people with stand-alone life insurance coverage outside of superannuation.
Coverage through superannuation may provide some assurance within its provisions but its capability in completely meeting a policyholder’s needs may be a concern, said Justin Delaney, head of Macquarie Life.
Yet about 50% of men and women with life insurance through superannuation believe the coverage is enough. Macquarie Life said there were about 72% who believe the coverage is reasonable and a surprising majority who said it was a sufficient coverage.
According to Delaney, the study respondents who felt the coverage was not enough have several reasons for sticking with the coverage type: some are not willing to spend time with their advisers to study their insurance while some find the cost too stiff. Seemingly, the major influential factor is simply what the client can afford.
Delaney commented on the positive result of the advice industry about ensuring client’s ample coverage because a higher rate of 30% for stand-alone insurance coverage was noted among respondents with financial advisers.
For respondents who did not have life insurance, 62% expressed uncertainty about taking on coverage while some said they are unlikely to get one. Seventeen percent of them thought having an insurance is beneficial but 45% of them would rather opt for private health coverage. A small percentage of 25 thought that no coverage is needed for people who own considerable assets.