Sorting out your life Insurance in 2024: What's best for your age?

With the holiday season now behind us, it's an ideal moment to focus on our financial well-being for the new year. As we step into this fresh chapter, understanding the impact of life insurance on our lives becomes more crucial than ever. Recent studies indicate that a 70% of Australians recognise the importance of life insurance, yet only about half actually have a policy in place.   

While there's a high number of insured individuals (around 15 million) in our country, contributing to a substantial total of $17.3 billion in premiums annually, there remains a notable gap in life insurance cover.  

Many of us have some form of life risk cover through their superannuation, including Death/TPD and Income Protection. However, coverage often falls short of community standards, especially for middle-aged individuals with high dependency. Despite this underinsurance, the industry's claim payment rate is commendably high, with ASIC and APRA studies showing over 90% of claims paid between 2016 and 2021. 

Insurance isn’t one size fits all 

Your insurance requirements depend on factors like your life stage, family situation, and savings. That's why it's crucial to seek advice and tailor your benefits to match what you truly need. Whether you're a young professional in your 20s, a growing family in your 30s and 40s, or navigating the golden years post-50, your insurance needs evolve. As you grow older, your financial responsibilities may shift. It’s ideal to regularly assess and modify your insurance cover to suit your current needs. 

Here are some handy tips and things to consider at each life stage when it comes to taking out life insurance: 

Early 20s 

In your early 20s, it's a good idea to think about getting some type of life insurance, like income protection. While you may not have any dependents yet, you do have financial responsibilities like rent and bills. If your super balance is over $6,000, you probably have insurance included, so it's worth considering when reviewing your finances. 

Late 20s and early 30s 

Big life decisions come into play at this age. Maybe it's time to buy your first home or start a family. It's important to take a good look at your finances and consider getting life insurance, or reevaluating your current cover. As your financial responsibilities grow, like mortgages, you might need to think about providing for dependents. There are different types of cover to think about, like income protection, total & permanent disability, death cover, or child cover.  

You can find more information on the different cover types here. 

Australian’s Income Protection needs and cover (by age cohort) 

Source: Australia’s Life Underinsurance Gap: Research Report | Financial Services Council 

Okay, so here's the deal: there are some noticeable gaps in the available coverage, particularly when we're talking about specific benefit categories. The real kicker is when these benefits aren't automatically part of a group's default insurance package. That's when we see the default group benefits not quite hitting the mark compared to what the community really expects. It's a bit of a puzzle, but it's super important to get our heads around it to understand insurance gaps better.  

For the full scoop, check out the Financial Services Council's report. 

Late 30s to late 40s 

Chances are you've got some insurance already sorted by this age. But it's important to give it a regular check-up as your circumstances change. For example, if you're getting a bigger mortgage, sending the kids off to school, starting a biz, going through a split, or looking after an older relative, it might be time to reassess your insurance situation. So give your cover a second look! 

50s and older 

In your 50s and older, it's a good idea to take a look at your cover and maybe make some changes to your life insurance plans. By this stage, your financial responsibilities might not be as big as they were in your 30s and 40s, unless you're still paying off your house or other debts. 

Now, you might want to focus on making sure your partner or spouse is taken care of financially if something were to happen to you. It could also be worth considering trauma insurance, because as you get older, the risk of serious illness goes up, especially if you're not as active as you used to be. 

Keen to learn about life cover options that suit your lifestyle? Have a chat with a financial adviser for expert guidance.