Why are Kiwis so under-insured?

Why are Kiwis so under-insured?

Life insurance is designed to help protect the people you love if the worst was to happen, but a recent study into how we insure ourselves shows that a shocking proportion of Kiwis - around 71% of us - have inadequate levels of life insurance.

The study also shows when it comes to income protection and mortgage repayment, 89% were under-insured and 91% of representative participants had inadequate insurance against critical illnesses. These results compared to a similar study in 2011 by Massey University indicated an alarming increase to levels of inadequate insurance. Massey University found 54% were under-insured compared to the 71% today.

While it’s no secret that under-insurance is a major issue for New Zealand, the study illustrated that Kiwis wrongly perceive having adequate levels of insurance and may face hardship if the worst was to happen. Often selling the house to cover costs or relying heavily on savings isn’t an option. Even if a partner was to work full time, they may not earn enough to support the family

So why are we so hugely under-insured as a population?

According to the study, we’re not thinking ahead and taking out insurance for several reasons: affordability, priority, trust and the perceived complexity of process. But life insurance doesn’t have to be expensive or complicated.

So what can life insurance cover?

It provides a cash lump sum pay-out to you or your family if you are diagnosed with a terminal illness or pass away. This takes the stress out of trying to cover mortgage payments while struggling with lost income and debt.

Life insurance can also help you with those unexpected costs that pop up or things you don’t want to think about. This might include a helpful early pay-out to cover things like funeral costs.

While you can’t always imagine the worst, it is worth planning for it. Taking out a life insurance policy today means you won’t be in the majority of Kiwis who aren’t prepared if something does happen - and it might surprise you how affordable it is.

Sources:

https://www.fsc.org.nz/site/fsc1/Gambling%20on%20Life%20-%20The%20Problem%20of%20Underinsurance%20-%20Financial%20Services%20Council%20-%20January%202020.pdf