The recent study conducted by AMP, involving a survey of over 470 parents with dependent children, showed that only 55% of New Zealand families have a life insurance policy.
Meanwhile, only 31% were adequately covered to ensure their family would receive support for a minimum of five years. This means that 67% of families either have no life insurance at all or have inadequate cover.
"The underlying reasons for Kiwi families not having adequate levels of insurance or not having it full stop centre around perceptions that it’s too confusing, too expensive and that the right level of cover has been taken when in reality, a third of the time, this just isn’t the case," John McMurdo, General Manager of Life Insurance at AMP says.
The survey shows that more than 90% of those insured believe their cover is robust, yet only 31% would have long-term support beyond that of paying off immediate expenses, such as a mortgage, at best.
The role of a financial adviser was found to be a critical factor in preventing underinsurance and those with an adequate level of cover tended to have consulted an adviser in the last two years. This group was also likely to use the level of their mortgage payments as a guide in determining the amount of cover required.
Vance Arkinstall, Chief Executive of the industry body Investment Savings and Insurance Association (ISI), says AMP’s recent underinsurance study highlights the critical importance of undertaking a personal needs analysis with a financial adviser on a regular basis in order to ensure at least a minimum of five years coverage.
Arkinstall adds that the issue of underinsurance is a social problem that will require concerted effort by New Zealand families along with the combined support of the life insurance industry, financial advisers, and policy makers to solve.
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