The Financial Services Council (FSC) and MetLife Australia have called on the Federal Government to use tax incentives to increase the take-up of life insurance.

The two organisations commissioned a survey that shows fewer than half of people know if they own a life product, and two-thirds of those with cover are unsure how much it is for.

The language the industry uses is one Australian consumers do not understand, FSC CEO John Brogden says.

“People understand car insurance, health insurance or what home and contents means, but they don’t understand what TPD [total and permanent disability] means. Or what income protection means. People think life insurance is death insurance and that’s an enormous lesson for us.”

Consumers also overestimate the cost of life insurance, with survey respondents estimating about $1500 a year. Cover for a 35-year-old non-smoking man is about $600 a year, the report says.

In pre-budget submissions on the national disability insurance scheme, the FSC calls for tax incentives on life insurance similar to those for private health cover.

It suggests these could be income-tested, with high-earners penalised through more tax if they do not take out cover.

The survey by GfK Australia shows most consumers are more willing to insure physical assets such as houses and cars than their own lives.

The top three reasons for not having life cover and income protection are: products are too expensive; they are of poor value; consumers have no spare money.

The top three possible motivations would be tax incentives; cover through super without a drop in income; and tax penalties that require a minimum amount of cover to avoid paying more.