Underinsurance in the Australian Life insurance industry is becoming a growing concern.

For individuals having adequate Life Insurance and Income Protection Insurance is one of the most important parts of a financial plan.

Life Insurance and Income Protection are slowly being recognised for their importance for financial certainty in the event one suffers a sudden and unexpected illness, injury or premature death.

Recent findings by TNS Research suggest that:
• less than 5 percent of Australians have adequate Life Insurance Cover
• there are over 5 million families within Australia than have dependent children
• Australia’s insurance gap is over $1.4 billion

Reasons for Underinsurance
Some of the reasons for underinsurance in the Australian Life Insurance market include a lack of awareness to the financial impact that can be caused by sudden illness, injury or premature death and an understanding of the products that can protect them which include Life and TPD Insurance, Income Protection Insurance and Trauma Insurance.

Other reasons include the perception government benefits will provide adequate support, that the cost of insurance is too expensive when in reality the cost of life insurance in some cases can be lower than health, home and car insurance and that insurance companies will not pay out in the event of a claim.

On a positive note research by KPMG has shown that Australian’s are four times more likely to have life insurance cover if they receive financial advice from a licensed adviser than those who do not.

They are also more adequately insured, with an average of more than two times the level of cover than those who have not sought financial advice.

A push for financial advisers to act in the best interests of their clients will have an impact on the numbers of people taking out life insurance policies.

The Life Insurance industry is also introducing initiatives to assist in the problem of underinsurance in the Australian Life insurance market including the launch of the Lifewise campaign which was launched in 2009, it is designed to promote insurance rather than sell it and has been a valuable tool for both consumers and advisers.