Life insurance a must

Covid sharpens focus on health and life after death

Households hit by high living costs are cutting back on groceries, phone bills and transport ahead of slicing into their life insurance, amid a post-Covid focus on health and asset protection.

New research from life insurance company NobleOak has found more than 40 per cent of people are concerned about their financial situation, with the economy and cost-ofliving pressures their key source of pessimism.

People are prioritising life insurance above many household expenses, and are more likely to hold life cover than before 2020, NobleOak’s Life Insurance Pulse Report says.

“In 2019, life insurance was fifth on the list of things people would cut but in this most recent survey it had moved to 11th place after grocery costs,” it says.

Mobile phone usage, savings, education, entertainment, health and fitness, holidays and transport expenses would all get the chop before life cover, it found.

The trend comes as premiums for death, disability, income protection and trauma insurance continue climbing, although not at the same pace as home, contents and car cover in the past year.

The report says half of Australians think there is more risk to their job or personal financial situation than a year ago, 45 per cent are concerned about their health, and the impact of Covid-19 is lingering.

NobleOak chief executive officer Anthony Brown said people became more riskaverse in times of economic uncertainty.

“They think about what things could potentially go wrong,” he said. “The perceived risk of not having life insurance is more severe than the consequences of cutting back on short-term spending (such as food and phone costs).

“People realise you can save money and eat economically but still eat well. Phone usage is very high and there are definitely savings that can be made without negatively impacting your lifestyle.”

Mr Brown said during the pandemic “people became a lot more aware of the risks associated with unexpected events and were thinking more about their mortality”.

Perks Private Wealth insurance director Eddie Bell said some people with a high need for life cover – such as those with dependent children, debt and school fees to pay – were adjusting their spending to retain cover.

“Disability insurance pricing, in particular income protection, has risen significantly over the past five years,” he said. “The range of increases has been anywhere from 25 per cent to 92 per cent depending on the insurer.”

Some people were “stuck” in an expensive policy because their health had deteriorated since they started it, Mr Bell said.

He said insurance remains a vital part of asset and wealth protection, and many people still don’t have enough.