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When you first applied for your insurance, you did so to protect yourself and the ones that depend on you. Not renewing your insurance policy may result in you losing the insurance protection you chose for you and your family. It’s important to know what to expect each year on your policy anniversary and understand why the cost of your cover may change. You’re in control of your insurance policy, and there may be things you can do to reduce your premiums, while keeping a level of protection.
Why insurance is important and how it works
It’s important to remember why you protected yourself and your family with insurance in the first place. It may have been to provide peace of mind for one or several of the below reasons if something were to happen to you:
- help pay the mortgage
- pay bills
- fund your children's education
- financial help to live independently if you can't earn an income
- help with out-of-pocket medical costs
- provide a lump sum to supplement any reduction in your income
We’ll be there when you need us
Your premium payments are pooled together with the premiums of all other customers in your product. If anybody makes an eligible claim, then the pool must have the funds to pay.
In 2022 alone, we needed around $1 billion to pay the claims of our customers - that’s around $2.8 million every day.
Naturally, everyone hopes they never need to make an insurance claim. But we want all our customers to have peace of mind in knowing that the funds are there to support them and their family should the worst happen.
Why your premiums may change each year
The reasons why the cost of your insurance cover may increase include:
- Aged-based increases - If you’re paying a variable age-stepped premium (formerly stepped premium)*, the cost of your cover usually rises each year as you age because the risk of serious illness increases as you get older, and therefore so does the likelihood of you needing to make a claim.
Note: Variable age-stepped premium’ is the new name for ‘stepped premium’. This is a change of name only and does not change how the premium structure works. The new name applies for all new policies issued from 16 December 2024. - Inflation (also known as indexation, cost of living, CPI) - Your sum insured may increase each year to keep up with inflation. As your sum insured increases, so does your premium. These increases are referred to as an inflation adjustment, and you can choose whether to opt out of them. Learn more about inflation adjustment and how to opt out.
- Plan fees - This is a charge for setting up and managing your insurance plan. Typically, plan fees increase each year in line with inflation.
- Stamp Duty - This is a charge levied by State/Territory Governments and therefore varies depending on where you live and what type of insurance cover you have.
Why may underlying premium rates change
Cost of paying claims - Our biggest cost, and the reason we exist, is the payment of claims to our customers. We have an obligation to make sure we’re always there when you or your loved ones need us and we are able to keep paying claims long into the future.
The insurance industry continues to see large volumes of new claims, and in relation to income protection, customers are receiving payments for longer than previously. A material contributor is Australia’s mental health crisis, with Resolution Life supporting significant numbers of Australians with conditions such as anxiety, stress and depression.
It is important that we monitor the ratio of premiums coming into the pool compared to claims payments going out, to ensure we can continue to fund claim payments. Regular reviews of our product pricing seeks to ensure we can continue to sustainably support our customers over the long term.
Industry-wide challenges - Factors such as the rising cost of living and number of claims affect all life insurers.
Wider economic challenges - What is happening in the economy can put pressure on insurance premiums, for example rises in interest rates and the impact of returns on investments held.
Why variable premiums (formerly level premiums) can also increase
Variable premiums don’t increase each year as the insured person gets older and generally stay the same for each layer of cover during the term of your plan. However, they may increase and are not guaranteed to stay the same as when your policy commenced.
Variable premiums will increase if you increase the sum insured or if you accept the increase in cover each year provided by the Automatic Inflation Benefit or if we review the premium rates for your product as a whole. A layer of cover is made up of your initial sum insured and additional layers are made up of any increases in sum insured you apply for or increases due to the Automatic Inflation Benefit. Premiums (and any applicable fees or government charges) can change, regardless of the premium type. If Resolution Life review base premium rates, any change in the base premium rate will apply to all plans of the same type.
Note: Variable premium’ is the new name for ‘level premiums’. This is a change of name only and does not change how the premium structure works. The new name applies for all new policies issued from 16 December 2024.
You're in control and have options
It’s important that you have a chat with your financial adviser, or with us, to understand your options before making a decision to change your insurance.
You can’t change all the factors that contribute to the total cost of your insurance, but there are many elements you can control and ways of potentially reducing the cost of your insurance premiums whilst staying covered. Here are some options you could consider:
- Extend the waiting period on your income protection policy.
- Review the benefit period on your income protection policy.
- Consider paying your premiums from your superannuation fund, rather than from your monthly household cashflow (although this will reduce your retirement savings).
- Remember that premiums paid for income protection cover may be tax deductible.
- Remove automatic inflation adjustments (also known as indexation, cost of living, and CPI). Learn more about inflation adjustment and how to opt out.
- Review your sum insured (your amount of cover).
- Cancel additional benefits or cover types that you no longer need.
Consider before cancelling your protection
It’s human nature to forget why you took out insurance in the first place, and you may be tempted to cancel your insurance cover in response to increases in premiums – but it may be a decision that results in you losing important insurance protection.
It may also be a decision you can’t easily reverse. If you subsequently apply for a new policy, you may have to undergo medical underwriting again. Any changes in your health, income and lifestyle since your existing policy was taken out may impact your ability to be insured. The terms, conditions and exclusions applicable to your cover could also change, and any new policy may cost more, or have excluded medical conditions due to your health.
Please talk to us or your financial adviser to understand your options around affordability.
Important information
Where the information on this website is factual information only, it does not contain any financial product advice or make any recommendations about a financial product or service being right for you. Any advice is provided by Resolution Life Australasia Limited ABN 84 079 300 379, AFSL No. 233671 (Resolution Life), is general advice and does not take into account your objectives, financial situation or needs. Before acting on this advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, as well as the product disclosure statement and policy document for the product. Any guarantee offered in the product is only provided by Resolution Life. Any Target Market Determinations for our products can be found at resolutionlife.com.au/target-market-determinations.
Resolution Life does not make any representation or warranty as to the accuracy, reliability or completeness of material on this website nor accepts any liability or responsibility for any acts or decisions based on such information.
Resolution Life can be contacted at resolutionlife.com.au/contact-us or by calling 133 731.
