Federal Budget 2014: Insurance policy fallout predicted
The $800 billion underinsurance problem in Australia remains a significant issue, as non-insurance is predicted to rise as a fallout of last month’s Federal Budget Announcement, said Deakin University.
Aussie households face a high amount of pressure to look at their spending in the face of reductions in various government concessions with life insurance policy being tipped as one of the main casualties.
With data from the Australian Bureau of Statistics estimating that the lives of working Australians could be underinsured by up to $800 billion, Deakin University’s senior lecturer Adrian Raftery said he was concerned the problem would magnify in coming months.
Raftery warned most Aussies “sadly” view life insurance as a “luxury” item and will cancel it, or let it lapse, at first opportunity when cash flow gets tight.
Raftery said Australians needed to be better educated about the levels of life insurance required. “At an absolute minimum, families should have cover to the equivalent of their current mortgage commitments,” he said.
“They should also be encouraged to take out an additional amount as a buffer to fund children’s education and lifestyle benefits, such as holidays and personal effects.”
By comparing the life insurance market and finding the right cover, you will reduce the expense of medical bills and mortgage repayments due to illness or injury, as well as the anxiety and burden.
Raftery suggested a tax deduction for life insurance premiums could be a solution to reversing the trend.
“We are already underinsured as a nation, so we want to encourage people to take out cover rather than give them opportunities to opt out.”