Are you underestimating your life insurance needs?

When was the last time you reviewed your life insurance needs?

Australians are not adjusting their life insurance cover to reflect significant life changes and also underestimating the likelihood of sickness impacting their income.

By Lachlan Colquhoun

Changing life circumstances mean changing responsibilities and liabilities, so it is good risk management to review your life insurance policy on an ongoing basis.

Major life events such as getting married, taking out new and bigger mortgages, becoming a parent or even expanding a business can trigger the need for additional financial protection.

Keeping life insurance policies in sync with your responsibilities ensures that adverse events – such as accidents or illnesses that render you unable to work – aren’t financially ruinous.

Does your life insurance cover you for enough? 

Many Australians are currently significantly underinsured. A recent report by actuaries Rice Warner found that the median level of life insurance cover meets only 61 per cent of what is needed to pay non-mortgage debt and sustain living standards until the age of 65 or until children reach the age of 21.

The research also found that median cover only delivered 37 per cent of net income, a figure which suggests that more people need to ensure the adequacy of their cover, not just for life cover but also income protection and trauma covers.

Are you insured for the right risks, such as Alzheimer’s or a heart attack? 

In December 2016, life insurance provider NobleOak commissioned research firm Pureprofile to conduct a comprehensive survey that asked more than 1000 Australian adults to rate their greatest fears. 

When asked to rank life events in order of future probability, respondents nominated cancer, heart attack, a car accident and stroke as the four most likely to happen to them, or someone like them.

The survey respondents significantly underrated dementia – including Alzheimer’s disease – as a cause of death, despite it being the second largest cause of death, after heart disease, according to the Australian Bureau of Statistics (ABS).

Rank the following events in order or likelihood to happen to someone like you in the future
(1 is most likely to happen, 10 is least likely to happen)

  Score  Overall Rank 
 Cancer  8175  1
 Heart attack  8100  2
 Car accident  7796  3
 Stroke  7387  4
 Premature death through a health issue  6785  5
 Angioplasty (surgical repair or unblocking of a blood vessel)  6484  6
 Parkinsons disease, Alzheimer's or Dementia  6345  7
 Plane crash  4468  8
 Terrorist attack  3990  9
 Lightening strike  3663  10
 Shark attack  3204  11
Source: Pureprofile research December 2016

The ABS figures show the most likely cause of death after heart disease and dementia are stroke, cancer and chronic lower respiratory disease. The statistics differ for men and women, with men more likely to die from heart disease and cancer, while more women suffer from Alzheimer’s.

When compared with the ABS statistics, the survey shows that a significant proportion of Australians are underestimating the probability of an untimely death or of contracting a major illness.

This has implications for their insurance and suggests that people need to better understand how much cover they need and what insurance type is right for their individual circumstances.

Consumers go DIY when it comes to researching life insurance

The development of online resources and their rapid take-up by consumers makes this information easily accessible, and people are increasingly taking a “self-service” approach to their insurance needs.

The survey found that a major behavioural shift is underway in how Australians source life insurance advice, with 50 per cent using the internet – more than those using financial advisers or relying on family members.

More than five out of 10 people seeking information on life insurance were prompted by a major change in their life circumstances. 

It remains to be seen whether improved education about the risks of under insuring, coupled with the ease of online comparisons, will see Australians make adjustments to ensure they are adequately protected.


NobleOak offers a comprehensive life insurance calculator, which factors in lifecycle stage, occupation, future retirement plans and current financial position to calculate the financial impact of risk events.

Copyright 2016 CPA Australia Ltd. Please address publications and copyright matters to: CPA Australia, Content & Publishing, 28 Freshwater Place, Southbank, Victoria, Australia 3006. Telephone: +613 9606 9606 Fax: +613 9682 0567 Email: [email protected] Internet: http// Please refer to the full Terms and Conditions.


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