Money Matters

Insurance Premium Rates and how to keep them efficient

Life insurance in its various forms has been in the market now for many decades. One of the things that strikes me as a Financial Planner is the vast numbers of people that have no personal insurance at all. Most have families and mortgages. These same people usually have high debt levels when compared to their assets, and are quietly concerned about their families if their lives were unexpectedly terminated, or if they suffered a heart attack, stroke, cancers, or other serious illnesses, or unable to work as a result of sickness/accident.

Over the years I’ve been asking my clients why they haven’t put in place adequate life insurance. Their ‘Action Blocker’ is usually their perceived cost of premium. Life insurance however, isn’t expensive, particularly when you consider exactly what you are insuring. I believe we would all agree that you can replace your house or car, but how replaceable are ourselves and the value of our input into our families?

If only we encouraged our young adults to secure their Life and Critical Illness cover early enough. Imagine this, being charged a premium applicable to a 20 year old when you are 45.

Many life companies have policies available with a premium style called “Level Premium”, whereby you are able to secure your insurance cover with an ongoing premium rate applicable to your age at commencement of the policy.

The real bonus of Level Premium is that the cover will be much more affordable at a time in life when you have the highest risk of a claim event, or your cash flow has heavy demands from children entering university, etc. You can save tens of thousands of dollars (or more) over the term of the policy. Effective financial planning at the very least.

It is a known statistic that Australians tend to cancel their life insurance during the years that they are more likely to make a claim and the reason for the cancellation is affordability.

For all parents of young adults, we should be encouraging our children to put this style of life cover in place. Perhaps even initiate the policy on their behalf and make it a gift until they can afford to take over the policy as they enter the workforce. You will be protecting your children and future grandchildren.

There is so much to be gained from getting organised sooner, rather than later.

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