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.
nib holdings limited has announced an average increase of 5.79% in health insurance premiums, effective from 1 April 2025. This adjustment reflects the insurer's response to escalating healthcare costs and heightened utilisation of medical services. - read more
The Australian Digital Health Agency (ADHA) has introduced the National Allied Health Digital Uplift Plan, a strategic initiative designed to bolster the digital capabilities of allied health professionals across the nation. This plan aims to facilitate seamless sharing of health information among practitioners, patients, and multidisciplinary care teams, thereby enhancing the quality and efficiency of patient care. - read more
Recent amendments to the National Law have introduced robust legal protections for whistleblowers within the health sector, marking a significant advancement in promoting transparency and accountability. These changes criminalise any form of retaliation against individuals who report misconduct, including the use of non-disclosure agreements (NDAs) to suppress such disclosures. - read more
In a significant move towards integrating fitness services into health insurance coverage, AUSactive has partnered with Private Healthcare Australia (PHA) to drive reforms in the private health insurance sector. This collaboration seeks to expand access to evidence-based preventive health services, including Pilates, Yoga, Tai Chi, and structured exercise programs delivered by accredited professionals. - read more
FITREC has announced a strategic partnership with Marsh, a leading insurance broker, to offer enhanced insurance solutions tailored specifically for fitness professionals. This collaboration aims to provide comprehensive coverage options that address the unique risks associated with the fitness industry. - 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
Defining life insurance and its importance: Life insurance is a pivotal financial product designed to protect your loved ones from economic hardship in case of your untimely death. It acts as a safety net, ensuring that your family can maintain their standard of living, cover outstanding debts, and afford future expenses like education and retirement. - read more
Life insurance serves as a crucial safety net, guarding your loved ones against the unforeseen. Just as you would take care of your health through regular check-ups, it is equally important to ensure that your life insurance policy remains in sound condition to provide the necessary protection. - read more
Life insurance is a financial product designed to provide a safety net for your loved ones and business in the event of your passing. At its core, life insurance aims to deliver financial protection by paying out a lump sum or ongoing payments to a designated beneficiary upon the insured's death. - read more
Life insurance might not be at the forefront of your mind, especially when you're young and healthy. However, understanding the essence of life insurance early on can significantly impact your financial future and provide much-needed peace of mind. - read more
Knowledgebase
Public Liability Insurance: A very broad term for insurance covering liability exposures for individuals and business owners. It provides broad coverage, generally including all exposures for property damage and bodily injury.
