Cost of living increases have impacted household budgets right across Australia. When this is combined with insurance premium increases, it’s not difficult to understand why many people are tempted to cancel their insurance cover. After all, until a claim event happens, it is easy to view insurances as an unnecessary expense. Before giving into the temptation, here’s some points to consider:
- Cancelling personal insurances (or letting cover lapse through non-payment) can expose you (and your family) to significant financial risks in the event of injury, disability or death.
- Studies in Australia1 and overseas show financial stress can increase the chance of physical and mental health issues, most of which can be covered by insurance.
- If you take up cover again in the future, your new policy will be medically underwritten. Changes in your health may result in the decline of cover or benefits, increased premiums due to loadings or new waiting periods.
If you are feeling the pinch and want to look for ways to keep your cover but relieve the financial strain, these options may be available to you:
- Do you have a premium waiver benefit built into your cover? A premium waiver may provide the ability to waive premium payments for a certain time period, based on certain circumstances.
- Review the type and amount of cover you hold to assess if it remains relevant to your circumstances. Life changes constantly. If your policy has been in force for a while, you may find you have lowered your debt levels, received an inheritance or kids have grown up and expenses have reduced. Reducing your cover amount or type to suit your current situation will reduce the premium, while still providing you with protection.
- Review extra benefits or features that have been added to your policy. If they are no longer relevant, investigate if they can be removed to reduce the premium.
- Review your habits and hobbies to assess if you are subject to an increased premium. For example, if you were originally assessed as a smoker and you haven’t smoked for some time, you may be able to apply for non-smoker rates (note that time frames will apply). Likewise, if you were subject to an increased premium due to a hazardous occupation or hobby that is no longer relevant, you may be eligible to have the premium loading removed.
- Assess if your premium and cover increase by CPI each year. If so, you may be able to opt-out of this feature. Consideration should be given to the impact this will have upon a future claim, and reinstating this feature may be subject to medical acceptance.
- Assess your ability to pay premiums annually. If your cashflow allows and you are looking for ways tighten your budget, a discount is often available for premiums paid annually in advance.
- Consider linking or consolidating multiple insurance policies. Linking or consolidating multiple policies could potentially reduce your premium. Consideration should be given to the impact of this change upon future claims, as it may lower the overall sum insured.
- Consider changing the waiting or benefit period for your Income Protection cover. Changing either of these options will result in a reduced premium. It’s important to assess the impact on your circumstances, as either option will result in you having to self-fund for a longer period of time in the event of claim.
- Consider funding some of your insurance premiums through your superannuation account. If you are paying directly for your insurance cover, you may be able to change the payment method to your superannuation account balance. This may be a good short-term option, however it’s important to consider the impact this change will have upon your retirement plans, particularly over time and if you are not making additional contributions to your superannuation account.
Protecting your most important asset (…..that’s you) may be the most important financial decision you can make. As you can see, there may be options available to change, but retain, your personal insurance. If you require assistance, feel welcome to contact the Income Solutions Advice team on (03) 5229 0577 or sending us an email to [email protected].
