A new survey suggests that three in four Australian parents without income protection insurance have no plans in place to support their family financially if they were suddenly unable to work – with 40 per cent saying they would rely on government benefits.
The comparethemarket.com.ausurvey of 712 working Australian parents[i] explored how people would provide for their families if they found themselves out of the workforce due to illness or injury.
When asked how long they could ‘survive’ without a regular income, before having to make lifestyle changes, one in three (29%) respondents indicated just one month. A further third (34%) chose two or three months. Just 14% said between four to six months.
Three in four (75%) respondents between 18–55 years admitted they have no savings or financial plan to fall back on if they were unable to work for three or more months. Surprisingly, the results were little better for respondents closer to retirement, with more than half (60%) aged 55 and above admitting they face the same scenario.
When asked what respondents might do if they were unexpectedly out of the workforce – with six options to choose from – applying for government benefits was the most popular choice (40% of respondents). One in five (21%) respondents said they would live on their savings and 12% would survive on their spouse’s income. Just 8% indicated they could rely on income-generating assets such as shares or investment property, 7% have an agreement with their employer who would continue to provide income, and 5% would borrow from family and friends.
Abigail Koch, spokesperson at comparethemarket.com.au, says: “The findings suggest that most families have not seriously considered their financial options if they were to lose their regular incomes. It’s not a pleasant topic to think about, but with one in two parents knowing someone that has been out of work for at least two months due to illness or injury, now is the time to get a financial safety net in place as you never know what’s around the corner.”
Without that safety net, parents were asked what they would sacrifice first, if they were unable to work. Forty-two per cent would drop family entertainment expenses, 16% would sell items from the family home, while 12% would start buying lower-cost household brands.
If an inability to work over the medium-to-long term had ‘dire consequences on income’, more than half (59%) of respondents would sell items of sentimental value or collectables, 25% would downsize the quality of their kids’ education and 16% would sell their home.
Finally, 40%[ii] of respondents said that they had little or no knowledge of income protection insurance. When provided with basic information about income protection – including that a person on an $80k salary could be insured for as little as $25 per month[iii] – more than half (51%) of respondents said the insurance would be valuable to their personal circumstances. One in five (19%) also said that income protection is just as important as health insurance.
[i] Respondents were Australian residents – 56% dads and 44% mums who are the household breadwinner (78%) or earn the same as their partner (22%). More than half (57%) earn more than $70,000 a year, while 9 in 10 (89%) had household expenses of up to $5000 per month. Survey conducted by Pure Profile. Questions answered online by across all Australian states.
[ii] Results rounded to the nearest whole number
[iii] Assuming a 35 year old non-smoking male, living in central Sydney (postcode 2000), earning $80,000 a year as a qualified accountant, with indemnity value income protection insurance, with a waiting period of 90 days and a benefit period of 2 years.