No one wants to leave their family exposed if something terrible happens. And it’s a good thing they don’t. I’m a big believer in protecting your loved ones financially… They are the most valuable thing in your life.
But here’s the reality: as we get older, life insurance premiums rise, sometimes steeply, and what once felt affordable can start to feel like a serious monthly drain. At the same time, our lives and finances can look very different than when we first took out a policy.
So, at what point do we ask ourselves: Does the life protection I have still make sense today?
I spoke with Life and Income Protection Manager, Mitchell Bass at Compare the Market, where I am Economic Director, about when it might be time to review your cover.
An important safety net
“Life insurance can be a morbid topic, and no one really wants to think about it,” Mitchell tells me.
“But it is there to take care of your loved ones when you pass away or become terminally ill.”
Indeed it is. I have seen firsthand just how much that lump-sum payment can be a lifeline when friends who have lost their life partners. It helps to cover funeral costs, debts, mortgages or everyday living expenses, and eases the financial burden during an already devastating time.
Likewise, adding income protection to your policy can provide ongoing monetary support if you become seriously ill or disabled.
It’s a financial umbrella if the worst were to happen.
Yet, many Australians may not be covered in the way they think … or need. And sometimes, that umbrella has a few holes in it.
Relying on super
According to Mitchell, underinsurance is a real issue with the vast majority of Aussies relying on the default coverage included in their superannuation.
“Which is insufficient for the majority of people,” he says.
What’s more, Mitchell tells me of those who have taken out their own policy, almost a quarter believe they are ‘underinsured’.
The reason is both the problem and the solution:
“They have not reviewed and adjusted their cover as their life changes,” he explains.
A life insurance health check
While we might get life insurance cover at one stage of life, we tend to forget to revisit it.
But we shouldn’t.
Life cover is not a ‘set and forget’ financial product. It needs to be reviewed from time to time to make sure it still fits your life.
“A lot can change in our lives. Things like moving house, a career pivot, or a new addition to the family could leave you either over- or under-insured,” says Mitchell.
“It’s worth reviewing your cover periodically to make sure it still aligns with your current situation,” he says.
How much you pay for it has certainly ‘aligned’, so you need to make sure everything else does too.
Why premiums increase
As we age we pay more for life insurance. That’s just a fact.
“Life insurance is risk-rated, which means the higher your risk profile at the point your policy is taken out, the more expensive your premiums will be,” Mitchell says.
In other words, as we get older, risk increases and so can costs, exclusions, and complexity.
“Younger people typically have lower initial premiums because they statistically present lower risk, and they’re also more likely to qualify for comprehensive cover with fewer exclusions due to having fewer pre-existing health conditions,” he says.
But it’s not just your health that shifts over time. Our finances do too.
The money picture
As we get older, we get a clearer view of our finances.
“People’s insurance needs can change as their financial circumstances evolve – whether that’s paying down debt, accumulating savings, or experiencing other life changes,” explains Mitchell.
“Some people find their need for cover reduces over time, while others maintain – or even increase – coverage for various personal reasons,” he says.
But like all things related to life and money, these are highly individual. One person’s financial picture, their dependents’ needs, superannuation nest egg, investments and their long-term goals will look very different to another’s.
Future proofing
As for how much cover you need now and in the future, that’s up to you and has to factor lots of personal considerations. But if you need help figuring it out, Mitchell recommends grabbing a pen and paper.
“List out everything you contribute financially… your income, but also things like unpaid care work or household management that could have real costs if someone else had to do them; this will give you a really clear picture of what your loved ones will need,” he says.
And he has this great analogy:
“It is almost like negotiating a salary. Ask yourself: ‘will this amount mean my family can live the lifestyle I want them to?’”
You can also use digital tools, like life insurance calculators, and speak with your financial adviser to help you crunch the numbers.
Balancing emotion with practicality
At the end of the day, life insurance should provide peace of mind… not become a financial burden. If your circumstances have changed, your cover needs to as well.
Taking a step back and honestly assessing your true financial responsibilities can help give clarity and maybe, lead you to buying a better umbrella with a new provider.
