Life Insurance Takes Backseat in Cost-Cutting Measures

As Australians tighten their belts in the face of rising living costs, life insurance is rapidly being placed on the chopping block.

The Council of Australian Life Insurers (CALI) reports that individuals are more likely to reduce life cover rather than home or car insurance.

Recent findings indicate a significant disparity between those holding different types of insurances. Approximately 79% of the population has motor insurance, yet only 34% have life insurance according to the independent research conducted by the council.

The survey, which examined the behaviors of 5,000 people, highlights a particularly stark gap among individuals aged 55 to 64. More than 80% maintain motor or home insurance, but a mere 29% have acquired life insurance. Age groups 35-54 show that 38% hold life cover whereas this number drops to 32% for younger adults.

Interestingly, working Australians are three times more likely to drop their life insurance as compared to home or car policies, underlining a trend that could have long-term financial ramifications. Additionally, about 50% of those surveyed suggest they would stop superannuation contributions if it meant reducing expenses.

According to CALI CEO Christine Cupitt, the situation accentuates the “advice accessibility crisis in this country.” She explained, "The advice needs of Australians are not being met, particularly for those who can’t afford to pay for a financial adviser in a cost-of-living crisis."

Cupitt stresses the importance of receiving proper financial guidance, stating, “Getting the right advice can set them up for the future, getting no advice can leave them with nothing to fall back on when times get tough.”

Despite recognizing the importance of advice, over 40% of respondents expressed a desire for customized financial guidance. This need could potentially be met through tranche two of the federal government’s Delivering Better Financial Outcomes reforms, designed to bridge this gap.

This push for enhanced financial advice platforms underscores a larger narrative about the necessity for accessible, affordable advisory services, especially during challenging economic climates. According to the original report covered by the Council of Australian Life Insurers, ensuring Australians are adequately insured and advised is essential.

Published:Tuesday, 3rd Dec 2024
Source: Paige Estritori

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Knowledgebase

Surrender Value:
The amount of money an insurance policyholder will receive if they voluntarily terminate the policy before it matures.