The advice gap

You might think that the ‘advice gap’ is the difference between having no life insurance, and having the ‘ideal’ amount. This cannot be counted or even calculated with any accuracy.

While zero cover is a pretty reliable number, and is adopted by lots of people it is largely a product of ignorance or thoughtlessness. They may simply have never thought about insurance or had it suggested to them. You might be surprised, but I still come across people who have simply never been asked to buy some life or income protection insurance and have only a vague idea what it does.

On the other hand academics can argue forever about the “ideal” amount of cover forever. Some of them think it should be zero too, come to think of it. Far simpler to refer to some insurance company calculators and compare that with what I call afterthought insurance.

Take the ‘calculated amount’ first. I invented a case that is about typical for the mid-life buyer of insurance. This column is too small to elaborate the details but a representative insurer calculator reckons the ideal amount of cover was $1.3 million.