Australians’ chronic life underinsurance is costing governments as much as $57 million a year, according to a new report.
The Rice Warner report reveals that the required life insurance of the average young Australian family currently sits at $680,000, while default cover provided by superannuation funds meets only 30% of that need.
The cover gap has been closing since 2005 when Rice Warner reported an average of only 15% coverage of young Australian families needs under default superannuation cover.
However, underinsurance is still a big issue for governments to manage, with the cost of income protection underinsurance reaching $260 million and TPD underinsurance reaching $1.2 billion.
Although all leading super funds have calculating tools to assist members in extending cover to suit their individual circumstances, there is still a significant lag in Australian coverage following the loss of a family member’s income.