Underinsurance is rife in the life insurance sector and will cost the Federal Government an estimated $1.3 billion over the next decade, according to research by the Investment and Financial Services Association (IFSA).

It says one in five families will suffer the incapacity or death of a breadwinner, with the resulting underinsurance gap a massive strain on a family’s ability to make ends meet.

Most families who do carry life insurance are still under-funded, according to research by the National Centre for Social and Economic Modelling.

It says a family with a household income of about $110,000 a year with two children will see its weekly income cut by $600 if the breadwinner dies or becomes permanently ill or disabled.

IFSA CEO John Brogden says a “she’ll be right” attitude to life insurance is common.

“This ground-breaking research shows that the likelihood people will be unable to provide for their family due to accident, illness or death is much more common that people think,” he said.

“This is an important issue with significant social implications.”