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 dies
- Husband disabled and temporarily unable to work, or permanently unable to work
- Wife dies
- 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.
(Trish Power, 21 Feb 2012)
