Most Aussies underinsured: Zurich.
Us Aussies are an optimistic bunch, however there’s a big difference between having a relaxed outlook and leaving the important things to chance. Unfortunately this overconfident, ‘bulletproof’ Australian mentality – according to Zurich’s latest research report – is leaving too many of us underinsured.
The Income Protection Gap, conducted in conjunction with Oxford University, uncovers the ways different markets around the world view income protection insurance, the potential risks they believe they face, and how and why they choose (or choose not to) protect their income.
The research has shown that, relative to their global peers, Australians demonstrate limited appetite for income protection, partly due to expectations of government support, such as Centrelink or the NDIS, and partly thanks to an overly-optimistic belief that they were unlikely to need it.
Some of the concerning findings include:
- Only 27 percent own insurance to protect income against liability/disability.
- One third believe the government will pay monthly benefit in case of lost income for 1-5 years.
- Almost one third (29%) have savings that will support then for less than one month in case of income loss; and
- While 44 percent of Australians have experienced some degree of income loss due to sickness or accident, only 27 percent had protected their income, and just 19 percent had a meaningful knowledge of income protection insurance.
It can be argued that Australians’ self-perception as the “the lucky country” should shoulder some of the blame. We boast a high standard of living, a strong sense of social justice and a robust welfare system compared to our neighbours – in fact, about half of all the taxes collected in Australia are directed to social spending[i] .
Reassuringly, the true value of income protection insurance is not completely lost on Australians either, with 57 percent of respondents saying that despite believing they would be eligible for government support, they would prefer to purchase protection from an insurer. However the wide-ranging fallacy remains a concern, particularly for higher income earners who would be unlikely to benefit from any government support due to means testing restrictions.
The good news is that Zurich’s research shows the needle may be shifting, with younger respondents more likely to buy income protection insurance. This may be due in part, to the tightening of government provisions in recent years however there is still a long way to go. This is a problem that that Zurich hopes ‘The Income Protection Gap’, in conjunction with the proactivity of advisers, can help improve.
[i] http://insidestory.org.au/how-fair-is-australias-welfare-state
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