Research shows a dramatic difference between the number of Australians who rate the importance of life insurance and the number who have it.

And those without financial protection usually have the most to lose from setbacks such as an accident or illness. This includes retirees and those approaching retirement.

The research was commissioned by Australia’s largest life insurer TAL to help better understand consumer attitudes and behaviours.

More than three-quarters of those surveyed (79%) rate life-related insurance as important or very important.

This contrasts sharply with just 52% of people who say they actually hold some form of life insurance.

Australians were asked to rate the importance of the four main kinds of life insurance in the event their income suddenly stopped. The four life-related insurances are: life cover, critical illness, income protection and total and permanent disability insurance (see note below).

TAL Group CEO Jim Minto said: “The results show that most people rate financial protection as important or very important to have yet only around of half of the population say they actually have some form of protection in place.

“On the one hand it is encouraging that people recognise the vital role of life insurance but the relatively low protection levels reflects just how much work is to be done educating the community about the need to protect themselves and their families.”

Those with a mortgage were the demographic group most likely to recognise the importance of life insurance, but their actual protection levels still lagged.

And while renters also recognise the importance of cover, they have worryingly low levels of protection in place.

“In the event that one’s income stopped suddenly due to accident or illness, what is left to ensure ongoing commitments such as bills, rent or mortgage repayments and schools fees to maintain current lifestyles levels, let alone the dreams of the future,” Mr Minto said.

“And having appropriate protection shouldn’t stop once the mortgage is paid. Having protection such as critical illness insurance, which can finance special treatments, pay everyday bills and for costly rehabilitation and modifications such as wheelchair access remains relevant long after the home is paid off.”

Mr Minto said people should not fall into the trap that because they have one type of insurance that they no longer require any of the other types of cover, because they each serve specific purposes to meet different needs.

“Eight out of ten people with at least one type of life insurance also have a much higher appreciation of the importance of the other types of cover, even though they do not hold those types of protection,” he said.

“Overall, however, it is hard to reconcile that most people understand how important it is to protect their lifestyles and their families’ financial wellbeing, but at the same time are not taking the action they need to do so. We just need to overcome this gap through more education and information.”

Life insurance pays your family or estate a lump sum amount when you die. Your family can use this amount to pay off your mortgage, cover ongoing living expenses or invest it to pay for future expenses like your children’s education. In some circumstances, such as terminal illness, it can be accessed before you die.

Income protection pays you up to 75% of your income if an illness, injury or accident prevents you from working. It is designed to replace your income, so that you can use it to pay your rent or mortgage, groceries, utility bills, and children’s school fees.

Critical illness insurance pays you an agreed amount if you are diagnosed with a specified critical illness event, such as cancer or heart disease. It is designed so that you can stop work and concentrate on getting better. You can use this money to pay down debt and cover living expenses, along with your medical costs and any modification needed to your home (such as rails or wheelchair access).

Total and permanent disability insurance gives you a tax-free lump sum if you’re permanently unable to work due to accident or illness. As you’re not able to work again, you can choose to use it as you wish. You can pay off debts and/or invest it to generate regular income.