Life insurance policies changing in Australia
Many life insurance policies were designed at a time when people were still expected to retire in their 50s and 60s, and have built-in expiry dates which can leave people uncovered and out in the cold if they were planning to work into their late 60s.
Luckily, a number of insurers have recognised this need and have updated their products accordingly. For example, it is now possible to obtain income protection insurance which provides cover all the way to age 70, a full 5 years longer than most other policies.
Just as people have regular health checks, or service their car, so too they should check to make sure that their life insurance coverage is up to date, and reflects their changing circumstances and the many policy improvements that have been introduced by Australian insurers in recent years.
Why are life insurance policies changing?
The facts from the Australian Bureau of Statistics (ABS) are clear: we're working longer and retiring later, partly because we want to and partly because we have to. It is estimated that today more than half of those in their early 60s are in the workforce, compared to ten years ago when the proportion was only a third.
An increasing number of Australians actually want to keep working because they enjoy their careers, their workplaces and the social interaction with their colleagues. In a similar vein, people are working longer because they can. Figures from the ABS confirm that older workers had lower rates of heart disease, diabetes, obesity and arthritis than their non-working peers, a phenomenon also reflected in other developed nations.
Delayed retirement
Then there are those who need to delay their retirement, a group swelled by the ravages of the Global Financial Crisis (GFC). At the GFC's peak (or should that be trough?), the Mercer Superannuation Sentiment Index estimated that 60 per cent of Australians over the age of 60 would delay their retirement because of the impact of the crisis on their superannuation balance.
Putting the GFC aside, a more fundamental force was already driving a necessity for many older Australians to work longer than their parents and that's the fact that as a nation we are taking on more personal debt, which is taking longer for us to pay off.
Life insurance and mortgages
CommSec recently estimated that homebuyers on the average income now have to work for almost 20,000 hours to buy the average Australian house with the average mortgage. In 1960, the average mortgage required 7,500 hours of work to pay it off.
It all affects life insurance policies in Australia
Longer life expectancies, longer working hours, delayed retirement, and increased household debt all affect life insurance policies.
Insurers are taking note and making changes to their policies to meet the needs of the people. If you would like to find out which life insurance policies better suit your needs, contact xLife today.
Resources:
1. ABS, Australian Social Trends, 2008
2. ABS, Health of Mature Age Workers in Australia: A Snapshot, 2004-05
3. RP, 2000 Mortality Study, Society of Actuaries
4. Mercer Superannuation Sentiment Index 2008
5. Reserve Bank of Australia, 'Aspects of Australia's Finances', June 2010
6. CommSec, March 2010
Source: Zurich 2010
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September 2010
