Aussies Underinsured by $1.8 Trillion

Australia’s underinsurance gap stands at $1.8 trillion, according to the latest figures from Rice Warner.

The researcher has released its latest Underinsurance in Australia Report, finding Australians are covered for just 60% of their life insurance needs. Rice Warner estimates the insurance cover level needed to appropriately meet the basic life cover needs of Australians is $4.581 trillion; the current level of insurance is $2.77 trillion, leaving a gap of $1.811 trillion.

For income replacement cover, the gap increases to $4.524 trillion, meaning Australians are covered for just 38% of their income replacement needs.

The report states that the typical middle-income Australian family with two children needs $680,000 of life cover, but holds just $258,000 cover (median level of life insurance).

Rice Warner says the cost to the government of underinsurance is:

• $1.3 trillion for total and permanent disability cover
• $260 million for income protection
• $57 million for life insurance

The report argues that “the default covers of typical superannuation funds do not meet the insurance needs of many families,” and that superannuation funds should consider differentiating default cover based on the marital status of members and the number of dependent children they have, rather than just on their age.

For more on Australia’s underinsurance gap, click here for insights from Rice Warner CEO, Michael Rice.