The majority of Australians are misinformed when it comes to life insurance, and the consequences could be just as damaging as underinsurance, Zurich has warned.
According to research conducted by Zurich, the vast majority of people who hold insurance inside superannuation have never conducted an analysis of their own life insurance needs. 80% of those surveyed said that despite knowing they had cover inside their super, they had never actually reviewed how much they would need to meet their personal financial obligations.
Similarly, many are unclear about what is covered by their group life policy, with 11% believing it covered them for a traumatic illness, and 5% thinking dental and optical costs could be claimed.
Respondents also struggled with the concept of income protection. Less than one-quarter knew how much they were covered for, and only 15% were able to identify the waiting period that applied to their coverage.
Richard Dunkerley, Head of Marketing for Zurich’s Life and Investments business, said the research exposed a significant knowledge gap, again illustrating the important role for education and advice.
5% thought they could use their group life policy for dental and optical expenses
“Every individual is different. Insurance cover ideally would match the specific needs of each individual, so it is important that people understand whether or not their ‘default’ insurance option delivers appropriate outcomes matched to their precise needs in the event of a claim.
“The research findings are a timely reminder for consumers to become better acquainted with the detail of their policies, ideally by seeking qualified advice, to help avoid the downside consequences of the ‘misinsurance’ gap,” he said.
Mr Dunkerley added that there was a duty of care on all participants within the superannuation, advice and insurance sector to do more to educate consumers about their insurance needs. He cited another of the survey’s findings, which revealed that three in five of those polled would have to sell personal assets just one month after an illness or injury in order to survive financially.
“The results further indicate the need for a more comprehensive program of literacy regarding life insurance to raise the general level of education and understanding amongst Australians,” he said.