Aussies opt to keep life policies despite cost of living crunch: Survey

As cost of living pressures mount and persistent inflation chips away at hard-earned savings, a new survey by direct life insurer NobleOak has revealed that more than 40% of Australians are worried about their current financial situation, with particular concern that their families would struggle financially if the worst were to happen to them.

As part of the firm’s annual survey of more than 1,000 Australians, approximately half expressed heightened anxieties over job security or their financial situation over the last year, revealing the increasingly precarious financial circumstances facing many Australians.

Underscoring these concerns, nearly two in three (62%) said they would struggle to find $4,000 for an unexpected expense, significantly up from the 37% registered in 2021.

NobleOak’s Life Insurance Pulse Report, which seeks to gauge Australians’ sentiment on life insurance and their current financial circumstances, found that more than a quarter (27%) of those surveyed feared their family would struggle financially if something were to happen to them.

This concern was most pronounced among those without a life insurance policy, with 37% stating they would not be confident of their families’ ongoing financial security, versus 21% with such a policy.

The report, unsurprisingly, found that younger breadwinners are least confident about their family’s ongoing financial security, with an average of 28% believing their families would struggle financially if they were gone. This contrasts with ‘empty nesters’, typically an older cohort, with 86% expressing confidence their family would manage financially – despite only 33% of this group holding life insurance products.

This finding suggests that younger Australians may perceive greater vulnerability or have less established financial safety nets, according to NobleOak.

A significant number of survey respondents expressed diminishing confidence in managing personal finances, with a little over one in three (35%) stating they do not feel in control of their finances. Of this figure, however, more than two in three (70%) said they wanted to improve their handling of their finances, highlighting, NobleOak stressed, the need for better financial literacy.

“The research underpinning the report shows us that Australians have a proactive mindset when it comes to their financial situation, but there is still a pressing need for improved financial literacy,” NobleOak director and chief executive Anthony Brown said.

Tapping the expertise of an adviser or broker for financial advice has increased compared to previous years, with upwards of one in four (27%) of respondents seeking advice on life/income protection insurance, retirement, investment planning or budgeting, the report found.

However, this demand has not returned to pre-pandemic levels, falling short of the high-water mark reached between 2017-19, where 33% had some form of financial advice.

Confidence in life insurance continues to increase

Despite the cost of living crunch, life insurance and income protection policies are likely to survive a cull in immediate personal or business expenses, the survey found, with many discretionary expenses – including savings or investment plans, transport expenses, education costs and mobile phone usage – facing the chop before a life policy.

Only mortgage payments, gas/electricity bills, general insurance and health insurance would be prioritised over life or income protection insurance policies.

Most respondents declared that they would also be prepared to reduce their grocery bill to hold onto their life insurance.

Of those who currently hold life insurance products, nearly two in three (65%) said they are planning to renew their policies this year, continuing a progressive trend since 2017. Back in 2017, just 47% said they would renew their life policies.

It is also a notable jump on last year’s figures, where 55% declared they would renew their policies.

“[This indicates] a substantial shift in consumer mindset around the value of these products,” the report wrote.

The percentage of those planning to renew their income protection cover shows a similar trend, with 68% stating they would renew.

Of those who do not currently hold life insurance products, 27% intend to take out life cover in the next five years; 24% intend to take out income protection; 16% intend to take out total and permanent disability; and 11% intend to take out trauma cover.

The main reason for holding life insurance products is to provide financial security, especially for families, the report found. In addition, 30% of empty nesters said they purchased life insurance to protect their home or pay off the mortgage. Around one in five (21%) singles said that they have or are planning to take out life insurance products to maintain their lifestyle.

Most of those with life insurance believe they have the right amount of cover for their needs, with fewer than one in five (18%) of survey respondents with a life insurance product considering themselves underinsured.