AUSTRALIANS are ditching life insurance in droves because of huge rises in the premiums they are forced to pay.
AUSTRALIANS are ditching life insurance in droves amid steep rises in the premiums they pay.
Industry experts estimate a third of life insurance policies are being cancelled within six years, and insurance specialists warn families risk financial ruin by quitting without considering cheaper options.
“Insurance companies have hugely increased premium rates because they are losing money,” financial planner Patrick Canion. “People think it’s outrageous.”
Insurers do not release details about cancellations, but independent figures paint a stark picture. Research by Rice Warner has found life and disability insurance premiums climbed 215 per cent in four years and income protection premiums jumped 82 per cent.
New figures from the Australian Prudential Regulation Authority show overall premium income has slid almost 20 per cent in two years. If policy numbers were steady, premium income should have climbed strongly.
Life insurance is an umbrella term for four types of insurance: death cover, total and permanent disability cover, trauma insurance that pays out for specific events such as cancer or heart attack, and income protection insurance.
CreationWealth financial planner Andrew Zbik said some planners had put clients into policies that were cheap at the beginning but the premiums quickly rose as they aged.
Catapult Wealth director Tony Catt said he believed the insurance trend mainly reflected ageing Baby Boomers reaching a stage where they no longer needed cover.
Mr Canion said moving life insurance into superannuation meant “at least it’s not coming out of their pocket”.
“People should also reassess how much cover they need. Check your premiums are competitive but don’t necessarily go chasing the lowest price,” he said.
Originally published as Life insurance exodus as fees surge
This article by Anthony Keane originally appeared in News.com.au on the 17th March 2017. References to Andrew Zbik have been amended to mention CreationWealth.