One in five Australians with life insurance inside super say they have stuck with their default cover option because they trust their super fund or employer to know the correct level of cover for them.
This is one of the findings from a recent survey conducted by the Financial Planning Association (FPA) and Zurich Financial Services, which highlighted significant opportunities for advisers to assist consumers identify their insurance needs.
The Life Insurance Literacy Gap report found that the majority of Australians who hold life insurance (52.2%) purchased the cover through their super fund with no assistance from a financial adviser. The report also showed that these people are almost twice as likely to have retained the default level of cover set by their fund, compared with those who have sought advice.
24.2% of respondents said the default cover looked sufficient without needing to do any calculations…
When asked why they chose to stick with the default level of insurance coverage, 24.2% of respondents said it “looked sufficient without needing to do any calculations”, 21.1% said they hadn’t gotten around to reviewing their cover, and 12.9% said they trusted that their super fund had chosen the correct level of insurance cover for them.
“People often think that their default level of insurance cover is enough to protect them financially, creating a false sense of security. The risk is obviously that without a personal assessment of needs, people can find themselves in dire straits if something goes wrong, finding out the hard way that they are mis-insured, as their policy does not cover them for the risks they thought they were protected against,” said Philip Kewin, Zurich GM for Retail and Life Investments.
Other key findings from the survey include:
- 42.2% of respondents believe that buying life insurance through super is the cheapest way to purchase cover, with or without assistance from an adviser
- 23.3% of Australians said that if they were to purchase a new life insurance policy or update their existing cover, they would seek advice from a financial planner
- 27.6% of Australians were unsure about the accessibility of life insurance through super
Mark Rantall, CEO of the FPA, said that improved financial literacy was the key to better informed and protected consumers and more needs to be done to reinforce the value of financial advice for all, regardless of wealth or stature.
“Too many Australians still believe that financial planners are only for the wealthy, yet nothing could be further from the truth. We know from the Investment Trends research that regardless of how much money people have, they feel happier and more in control of their financial future if they take the simple step of consulting a financial planner,” he said.
Too many Australians still believe that financial planners are only for the wealthy
Mr Rantall’s comments coincide with the 15th annual Financial Planning Week, which aims to increase all Australians’ understanding of financial advice and the benefits it can bring. As part of its activities during Financial Planning Week, the FPA is again hosting its ‘Ask an FPA Expert’ online forum, which enables consumers to ask their burning financial questions and have them answered by an FPA Expert.
“We are determined to ensure that Australians who seek financial advice have access to trusted, qualified financial planners who always have their best interest at heart. The number of clients actively using a planner in Australia rose to 2.5 million last year, up 100,000 on the previous year, which is clear evidence that the value of quality financial advice is being recognised,” Mr Rantall said.
“We encourage all financial planners to use Financial Planning Week as an opportunity to spread the good word about the positive impact of their work on their local community and more broadly. Our Chapter Chairs will be engaging with their local media to spread the word as local ambassadors.
“We invite FPA members to promote Financial Planning Week within their own channels. One of the ways they can do this is by liking the FPA Facebook page and sharing the daily blog content with their own networks. As more Australians understand that financial advice can benefit them, at every stage of their life and regardless of their financial situation, we expect to see the number of people using a financial planner rise,” he added.
Seriously, why would you ever want to deal with the 24.2%
This why there is a chronic under insurance. I would trust and employer to do the right thing. I have seen many instances where an employer has downgraded cover in their super fund because of a bad claims experience particularly in the Group insurance market. Besides how would they know what is appropriate level of cover was. I would suggest that many would only have 30% of what is really needed.
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