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.
Envest Group, a prominent player in Australia's insurance sector, has announced the launch of TLI Underwriting, a new agency dedicated to providing specialized insurance solutions for heavy motor fleet operators. This strategic move aims to address the unique challenges faced by larger transport businesses in Australia. - read more
The Australian Securities and Investments Commission (ASIC) has commenced legal action against QBE Insurance, alleging that the insurer misled more than 500,000 customers regarding premium discounts over a five-year period. This development has significant implications for the Australian insurance industry, particularly for policyholders seeking transparency and fairness in premium calculations. - read more
Hutch Underwriting has unveiled Trade Pack, a comprehensive insurance solution designed specifically for Australia's small and medium-sized trade businesses (SMEs). This innovative product aims to streamline coverage and alleviate the administrative challenges often faced by brokers and tradies alike. - read more
Insurance Australia Group (IAG) has integrated generative artificial intelligence (AI) into its property claims assessment process, specifically to determine the necessity of 'make safe' repairs. This technological advancement aims to enhance operational efficiency and reduce costs associated with unnecessary contractor dispatches. - read more
Hollard Insurance has been ordered to pay over $225,000 in compensation after contractors appointed by the insurer caused significant dust damage during home repairs. This case underscores the critical importance of diligent contractor oversight in the insurance industry. - read more
Life insurance remains one of the most crucial considerations for new parents aspiring to provide a secure future for their growing families. The arrival of a child marks a transformative moment, redefining priorities and responsibilities. At its core, life insurance is a safety net, designed to offer financial protection and stability to loved ones in the event of an unforeseen tragedy. - read more
Life is an unpredictable journey filled with twists and turns that can challenge even the most prepared among us. Sudden illnesses and unexpected injuries are just some of the uncertainties that can disrupt the harmony of family life. The emotional turmoil brought on by these circumstances is often compounded by the financial strain they can cause. It's during these trying times that the true value of peace of mind becomes clear. - 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
Life insurance is an essential financial protection that provides peace of mind to policyholders and their loved ones. The premiums you pay are determined by various factors, including age, health, lifestyle, and occupation. - read more
Life is a tapestry of precious moments, each framed by the inevitable uncertainty that the future holds. The awareness that our paths are peppered with unpredictability can often cast a shadow of concern, affecting how we cherish the present. For many, the well-being of family remains the cornerstone of life's purpose, driving the need for a foundation that offers stability and reassurance in the face of life's unexpected challenges. - read more
Knowledgebase
Peril: A specific risk or cause of loss covered by an insurance policy, such as fire, theft, or flood.
