Life insurance: One in five parents will die early, or be too sick to work
One in five parents will become too sick or injured to work, or will die before retirement age, according to a disturbing report released during 2010.
The Lifewise/NATSEM Underinsurance Report states that 18 Australian families lose a working age parent every day, which translates into nearly 7000 families each year devastated by a loss of a parent. (Trish Power (21/2/2011))
According to the Lifewise report, 95% of families do not have adequate levels of insurance.
The ‘big picture’ finding from the report was that due to underinsurance by most Australians, if a parent becomes ill or dies, then such an event, and many events like this one will cost the government $1.3 billion in additional social security payments.
The study measured the impact of four scenarios on a typical family. A ‘typical’ family involved a couple with two children under five, and the main income-earner worked full-time earning $75,000 and the secondary-income earner worked part-time earning $35,000. They have a mortgage. The report assumes that the male parent has $30,000 in super, $91,000 in life insurance cover, and total and permanent disability insurance of $71,000. The female parent has $14,000 in super.
The four scenarios measured in the report were:
Husband disabled and temporarily unable to work, or permanently unable to work
Wife disabled and temporarily unable to work, or permanently unable to work.
According to the report, the typical family would lose half or more of their income as a result of the death of a parent, or the serious injury or illness of a parent. Other findings from the report included:
Based on current average levels of insurance, the typical Australian family’s weekly income will be cut by half to about $600 (after paying for childcare and mortgage) where the main income-earner (husband) becomes temporarily ill or injured and can’t work, or where secondary income-earner (wife) dies or becomes temporarily or permanently disabled
The changes to the family’s financial situation will be devastating, and will last at least 10 years.
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