Financial Strain Forces Australians to Reevaluate Life Insurance
Financial Strain Forces Australians to Reevaluate Life Insurance
1
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The rising cost of living is compelling Australians to view life insurance less as a safeguarding asset and more as an unnecessary liability.
This trend emerges amidst a confluence of economic challenges including escalating inflation, increasing interest rates, and notable shifts in population demographics, according to David Sarkis, the CEO of iExtend.
Amid relentless premium increases, Australians are increasingly seeking the counsel of financial advisers to reassess the worth of their life insurance policies. Decisions hang in the balance as many contemplate whether to uphold, amend, or abandon their current coverage.
A survey conducted by the Council of Australian Life Insurers (CALI) titled "The State of Australia’s Safety Net," highlights that nearly a quarter of the 5,000 adults surveyed would consider policy cancellation should their financial circumstances deteriorate. Moreover, 68 percent expressed anxiety over their continued ability to afford life insurance given the ongoing economic pressures.
David Sarkis underlined this shift, stating, "As a result of a range of financial and demographic pressures, we have seen more Australians change their view of their life insurance and are seeking to cancel it." The burdens of everyday expenses are driving households to contemplate policy cancellation as a means to ease the immediate financial strain.
Research by iExtend points out seven pivotal reasons behind the trend of policy cancellations:
Premium Inflation: Life insurance premiums in advanced economies are projected to climb by 1.5% in 2025, with more pronounced increases anticipated in emerging markets. This trend saps confidence in maintaining long-term life insurance commitments.
Health Challenges: With 39% of the Australian workforce afflicted by chronic conditions, health changes are steering decisions around life insurance policy cancellation, as indicated by iExtend's criteria.
Ageing Society: Predictions suggest that by 2066, individuals over 65 will represent up to 23% of Australia's population, elevating the importance of estate planning and related insurance considerations.
Cost-of-Living Escalation: The Consumer Price Index saw a 2.3% increase over the year leading to November 2024, pressuring Australians to trim discretionary spending, including life insurance.
Intergenerational Wealth Shift: The Productivity Commission reports an estimated $3.5 trillion in assets will transfer across generations by 2050, influencing decisions surrounding life insurance and estate plans.
Real Estate and Business Sales: Economic pressures compel Australians to offload property despite market conditions, pushing life insurance into the realm of valuable long-term assets.
Advice Accessibility: With just 15,400 financial advisers available nationwide, obtaining professional advice remains challenging, influencing uninformed insurance decisions.
Sarkis concludes by indicating iExtend’s commitment: "We are working with advisers and their clients to ensure they make informed choices about the future of their life insurance policies, decisions which impact families and generations of Australians."
These insights are adapted from a report originally published by Yasmine Raso on CALI's findings and expert opinions in the life insurance sector.
Published:Thursday, 30th Jan 2025 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
Insurtech Australia has officially announced the upcoming InsurtechLIVE26 conference, scheduled for 18 February 2026 at Doltone House Jones Bay Wharf in Sydney. This event is poised to be a pivotal gathering for professionals in the insurance and technology sectors, aiming to explore and advance innovation within the industry. - read more
Insurance Australia Group (IAG), a leading insurer in the Australian market, has highlighted the escalating impact of climate change on home insurance premiums. The company reports that the increasing frequency and severity of weather events are significant factors driving up the cost of home insurance for Australians. - read more
The Insurance Council of Australia (ICA) has recently released a white paper highlighting the urgent need for reforms to state and territory civil liability laws, which have remained largely unchanged for nearly 25 years. These outdated laws are contributing to significant increases in public liability insurance premiums, affecting a wide range of businesses across the nation. - read more
The Australian Prudential Regulation Authority (APRA) has released its latest National Claims and Policies Database (NCPD) statistics, revealing a substantial increase in public liability insurance premiums over recent years. According to the data, premiums have risen by 40% since 2015, a rate that surpasses general inflation and places additional financial strain on businesses across the country. - read more
Sydney-based insurtech company Upcover has launched a new management liability insurance product designed specifically for small and medium-sized enterprises (SMEs) and sole traders across Australia. This offering aims to provide comprehensive protection against a range of risks, including employment disputes, official investigations, tax audits, financial crimes, statutory liabilities, and allegations of legal breaches. - read more
Life insurance is a financial product that provides a lump sum payment to your beneficiaries in the event of your death. It is designed to offer financial security by covering debts, daily living expenses, and future financial obligations. - read more
Shareholder agreements lay the cornerstone for stable business relationships and continuity in Australia. Acting as a contract among business owners, these agreements set forth the expectations, rights, and obligations of all parties involved. They are particularly vital in delineating clear paths for dispute resolution, succession planning, and the transfer of ownership shares under varied circumstances, including the untimely death or departure of a shareholder. - read more
Life insurance is one of those cornerstones of financial planning that often gets overlooked. Yet, the importance of life insurance in safeguarding your family's future cannot be overstated. It's a robust financial instrument that provides peace of mind, knowing that your loved ones will be financially secure in the event of your untimely passing. This introductory section lays the groundwork for understanding why life insurance is pivotal in your family's financial health. - read more
Life insurance is a financial product designed to provide peace of mind by offering a safety net for your loved ones in the event of your passing. The primary purpose of life insurance is to ensure that your family is financially protected, allowing them to maintain their standard of living even without your income. - read more
Financial security for families is an essential consideration in any household. Life can be unpredictable, and ensuring that your loved ones are protected from financial hardship in your absence is a critical part of financial planning. - read more
Knowledgebase
Claim Adjuster: An insurance professional who investigates and evaluates insurance claims to determine the amount the insurance company should pay.
