Young Australians have the lowest levels of life insurance, with just 36% holding some form of cover.

The CommInsure Life Insurance Survey finds those Australians aged between 25-49 are better protected, with 63% holding some cover.

As expected the level of cover drops with those aged between 50 and 64. A total of 53% hold some cover in this age group.

CommInsure GM Retail Advice Tim Browne says more than 50% of Australian families would be forced to rely on government support if a family member were to die or develop a terminal illness.

“These findings show Australia is facing a significant underinsurance crisis, with only half the population currently insured,” he said.

“Statistics reveal life underinsurance costs the Government $140 million annually.”

Mr Browne says Australians are underinsured by $3.1 trillion. This is resulting in average payouts of less than $350 a week for claims compared to the average weekly income of $1322.

“Our research also demonstrates certain demographics are more at risk of financial hardship because of their lack of insurance,” he said.

“Many Australians believe they won’t be affected by serious illness or injury, yet in reality a male aged 30 to 64 has a one-in-three chance of suffering a major medical illness like cancer, heart disease or stroke.”

The survey found many Australians have life insurance through their superannuation funds, but the amount covered is low.

Younger Australians (71%) are more likely to opt for default cover, a significantly higher proportion than 63% for the 35-49 age group and 60% for the 50-64 group.

Mr Browne says this may be due to a lack of awareness of the potential cover provided through a super fund.

The survey found 58% of Australians with a super fund are not aware they might have some life insurance.

“The underinsurance problem in part stems from a lack of education about the importance of having insurance in place and of understanding appropriate levels of cover,” he said. 

“Further compounding the problem, many Australians aren’t aware they may already have some cover through their super fund, while others often incorrectly assume their super provides appropriate levels.” 

Mr Browne says while cover through super funds is good, in most cases it will not provide enough financial protection against risks.