The disadvantages of letting your insurance lapse
Like many Australians you may be wondering if your cover can adapt to your needs.
If you let your insurance lapse, you risk being unable to make a claim when you may really need to. Take a look at our claims statistics below and you’ll see that, more often than not, it’s our older customers who understand first-hand the true value of their insurance.
| Life claims by age | |
| Under 30 years | 6% |
| 30 to 39 years | 12% |
| 40 to 49 years | 18% |
| 50 to 59 years | 30% |
| 60 years+ | 34% |
Source: Claims Paid 2013, AMP Life Limited and The National Mutual Life Association of Australasia Limited Claims.
Based on the statistics above, if you’re over the age of 50 there is a higher chance you’ll need to make a claim on your policy at some point in the future. So it’s worthwhile considering the value of your insurance before and your personal situation before you let it go.
Health, age and changing legislation
If you let your insurance lapse, you need to think about whether you will be able to get the same cover back again, should you ever want to. And it’s important to know it’s not just age and health-status that can affect a new insurance application.
As an example, new legislation means some policy options1 held in super are no longer available for new applicants at all. So for some people, cover that was once in place and then lapsed is now gone for good.
Investing where it counts
As your dependants leave home and your debt levels reduce you should probably reconsider the level of cover you need and have. While you need to understand your own circumstances and changing needs, often one of the main reasons customers let their insurance lapse is to save money. An insurance policy can seem like an unnecessary expense and with any luck it may not be necessary at all. But ironically, not being covered for an event that actually happens can be far more expensive than the cost of a policy.
There are a few ways to manage the affordability of insurance
Insurance through super is an option where you don’t have to pay for your policy from your household budget; however it does come out of your super. Accordingly, you need to carefully consider your personal circumstances and decide whether this option is right for you.
Insurance can give you peace of mind as you near retirement. If you need to claim, your regular super payments may be covered too so you’d be boosting your retirement savings even if you’re out of action.
The key is to make sure your insurance always meets your current needs―that way, the cost of your policy can reduce if your needs become less.
Online source: Produced by AMP Life Limited and published on 15 September 2014
To explore your options, please contact us at Avante Financial Services.
