There may be some good news on the horizon
for woman in Australia wishing to obtain life insurance. This follows the
release of the Australian Bureau of Statistics’ new data showing that woman’s
life expectancy has increased even more.
According to the Australian Bureau of
Statistics, in the 126 years prior to 2016, life expectancy in Australia for
women has increased by 33.8 years
(http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/3302.0.55.001Media%20Release12014-2016).
This increase is owing to better health care; however, the impact of this data
also has implications for life insurance policies.
How gender affects your premiums
Although there are multiple factors that
determine your life insurance premium, the two major factors are age and gender.
Regarding gender, it is interesting to note that the media release from the
Australian Bureau of Statistics indicated that the life expectancy of woman
increased from 84.5 years in 2015 to 84.6 years in 2016. Although this a minor
increment, it is enough to rank Australian women sixth in the world, in terms
of nations in which women live the longest
(http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/3302.0.55.001Media%20Release12014-2016).
Interestingly, the life expectancy of women
has increased, whereas male counterparts’ expectancy has remained constant at
80.4 years for both 2015 and 2016
(http://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/3302.0.55.001Media%20Release12014-2016).
Also, based on the latest data, women outlive men by some 4.2 years. The reason
for the difference is that men are more prone than women to health-related
problems such as stroke, diabetes, and heart disease
(http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4338.0~2011-13~Main%20Features~Heart%20disease~10005).
If that were not bad enough, men on average, are more likely to die of internal
injury than are women, being more reluctant than their counterparts to seek
medical advice and assistance
(https://theconversation.com/men-more-reluctant-to-go-to-the-doctor-and-its-putting-them-at-risk-57420).
The impact of the latest data on life insurance policies for women
Taking into account the bias in favour of
woman, depending on whether she is, for example, a non-smoker, a woman may
initially receive about 20-45% discount by comparison with premiums for males.
However, with the new data released, and because insurance companies make more
on the premiums if the client lives longer, this implies that insurers will be
making more profit out of women in the years to come. Therefore, the insurer is
able to reduce the rate of premiums paid by women and still make a greater
profit in the long term.
Nevertheless, irrespective of the general
data released on life expectancy, when anyone applies for life insurance, he or
she should ensure that they are being covered at a competitive rate.
Key differences between advised and direct
income protection
According to news.com.au, 95% of
Australians do not have adequate income-protection cover
(http://www.news.com.au/finance/money/face-up-to-income-protection-folly/news-story/cf947d42d33773f9d7c80f18ccbcc11e).
When faced with the options of direct and advised income protection, many do
not know the various benefits that will best work for their needs.
Between 2015 and 2016, 13% of Australians
did not return to work after an injury
(https://www.safeworkaustralia.gov.au/workers-compensation). Those who had time
off took an average of 2 weeks; and in serious cases took 9.2 weeks off from
work https://www.iscrr.com.au/__data/assets/pdf_file/0020/540830/118_Work-injury-in-Australia-Review-2004-2014.pdf).
To cover the loss of income, for example, during the time you are injured, you
could take out either a direct or advised income-protection policy. However,
these two options have some differences.
Price
For the 69% of Australians still without
income protection (http://www.lifewise.org.au/see-more-statistics), and
searching for it, the biggest difference between advised and direct income
protection is price. On average, the cost of an advised income-protection
policy is higher than direct income protection, around 35% more. However, if
there are details listed in the fine print, this can result in the direct
income protection working out more costly. Also, some people may score on one
policy while others might not. Variables such as age, occupation, and lifestyle
sins such as smoking, could impact the premiums. However, what has the biggest
impact on price are details mentioned in the fine print.
Fine print
Going direct may offer some surprises in
the small print. Firstly, when buying a policy direct, you are not buying a
solution from a financial advisor. Instead, you are obtaining it from a
salesperson working in a call centre. As such, information may be shared.
Should you wish to take the cheaper route, you will therefore need to conduct
your own research prior to a decision. Failing this, your cheap option could
turn into an expensive option. For example, if you have pre-existing
conditions, these may not be covered by the policy, cover becoming useful at a
later stage of your life. By contrast, in advised income protection, the
advisor will examine the fine print in detail. This means that when you come to
claiming, the element of surprise is likely to have been minimised.
Other important details listed in the fine
print relate to the benefit period, and partial disability. As such, advised
income protection will offer a longer benefit period − up to 70 years − whereas
direct income protection will end at 65 years of age. As for partial
disability, advised income protection will allow for partial disability; most
direct-income protection plans exclude this cover in their fine print.
Claims
In most cases, advised income-protection
plans will have a peak payout of $30 000 monthly, however, direct income
protection plans will offer much less. In most cases the claim amounts will be
half that of advised income-protection plans. However, claims may be rejected.
In 2016, up to 37% claims were rejected, of which 25% were for trauma cases
(http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-347mr-asic-issues-industry-review-of-life-insurance-claims/).
Overall information before signing any contract
In some cases, with direct-income
protection your application may be rejected if you do not fit neatly within all
the boxes. However, when comparing this to advised income-protection plans, the
difference is that a financial advisor may be able to find a more suitable
cover plan if you have certain health issues.
However, not all direct income-protection
insurance policies are equal. If you do wish to select the direct option, use a
comparison website such as savvy.com.au that will list the best options
currently. By comparing the price and features of each, you could find a policy
that offers you outstanding value.
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