Why Life Insurance Matters

These two articles variously reflect on why life insurance matters for Australians and why life insurance for homemakers in Australia appears to be a somewhat under-utilised advice solution…

Cancer and the Financial Burden

In this article, reproduced with permission from AIA Australia, the company’s Olivia Sarah-Le Lacheur reminds us about why life insurance matters and what it means for people when they need help the most…

 

With an estimated 145,000 new cancer cases diagnosed in 2019 (1) there is a good chance that you – or one of your clients – could be affected by cancer in some way, whether diagnosed with a form of cancer or knowing someone who has cancer.

And, with significant improvements in early detection and treatment, experts estimate close to 70 per cent of people diagnosed with cancer in Australia will live more than five years beyond their diagnosis.(2)

Being diagnosed with cancer can be a daunting time for all affected, but having the necessary information to be able to plan and cope during this time can help the future outlook. Understanding the various costs, both treatment and non-treatment, can help a client explore the various options available including a sound financial plan.

The lucky country

We are lucky to live in Australia, with access to quality public and private hospitals. Our health care system is largely publicly funded, but unfortunately this doesn’t cover everything. Out-of-pocket expenses such as those associated with diagnosis, treatment, and survival can weigh heavily on individuals and families. So, without life insurance some of us will face the big financial burden.

So, what is cancer? It’s a term for diseases in which abnormal cells divide without control and can invade nearby tissues.(3)

The simple truth is, cancer doesn’t discriminate – children, teens, young adults, adults, recovering cancer patients, the elderly – we are all in cancer’s line of sight. You don’t need to sign up or take a ticket.

Grim outlook? Possibly. However, death rates have fallen by 24 per cent compared to nearly 40 years ago.(4) Medical advancements, early detection and change in lifestyle have all contributed to a decline in [cancer related] death rates. But here’s the kicker – with these advancements comes financial burden.

Understanding the overall potential costs, and putting together a sound financial plan, which includes adequate life insurance, can play a role not just in treatment, but in the mental and physical wellbeing of all involved.

Calculating the cost of cancer

Calculating the cost of cancer is not easy. There are many variables – doctors and specialist fees, travel and parking, accommodation, prescription and over the counter medication, loss of income, the type and stage of cancer, even where you live, all have an impact on finances.

The financial burden doesn’t stop there as carers are also impacted. Their working hours are impacted with 51 per cent of cancer carers who previously worked full-time, have had to take leave or reduced working hours.

Furthermore, 72 per cent of cancer carers report that they have had their finances negatively impacted.(5) To further compound the financial impact of being a carer, they rarely have access to travel and accommodation schemes as many carers are ‘informal’ caregivers.

A survey conducted based on interviews held with patients and carers, revealed the average amount lost each month by someone looking after a cancer patient is $370. When coupled with the potential loss of income from the cancer patient themselves, this then creates an even greater financial burden.(5)

A survey conducted by the Consumers Health Forum of Australia found that of the 1,200 responses, more than a quarter of respondents treated for breast cancer incurred out-of-pocket costs of more than $10,000.6 It is important to note that each case of cancer is different with differing variations and treatment plans, which can alter the overall cost for your clients.

The emotional and physical burden

It is important to also understand that the impacts are not just financial. They extend to the emotional and physical wellbeing of both the cancer patient and their carer(s).

For cancer patients, a change in lifestyle, fear of the unknown, and feeling out of control may all impact their physical, mental and emotional wellbeing.(7) For the carer, the impact of being the emotional support for a cancer patient and taking on additional chores around the house can create a feeling of isolation and resentment towards the situation.(8)

Financial assistance

Providing cancer patients and their family/carers with adequate upfront information about the potential costs associated with cancer would go a long way in helping plan for the future and would be valuable when discussing treatment options. Being able to plan for the future may also lead to less emotional burden for all involved.

There is a common misconception that those with private health funds are covered for doctors, hospital costs, tests etc. However, this is not always the case, as health funds may cover part of the costs of specialists, hospital and tests, but not all.

There are a few financial assistance options that patients can look into. For example, the Cancer Council and Leukaemia Foundation can assist with help. The issue is knowing what is available, and how clients can get access to this assistance.

While costs can be high, there are a number of avenues of assistance. Having the knowledge beforehand can go a long way in mitigating many issues. For example, utilising the various assistance programs mentioned above is one step. Coupling this with government assistance, private health insurance if you prefer, as well as a life insurance policy, can all help bridge the financial burden.

Maintaining or applying for CommInsure Trauma Cover can give your existing clients the opportunity to create real options in a traumatic time. It can make a contribution towards financial survival by providing a benefit payment which your client may use to address a financial shortfall.

For more information contact your BDM or State Office.

Olivia Sarah-Le Lacheur is General Manager Retail Distribution – Partnership Development at AIA Australia

References:

  1. Australian Institute of Health and Welfare, Cancer in Australia 2019
  2. Cancer Council Victoria Cancer Prevalence in 2040 1 Feb 2018
  3. Cancer Terms
  4. About Cancer
  5. Cancer Forum
  6. Out of Pocket Pain – the $10,000 Issue
  7. Cancer Treatment Side Effects Guide for Aborigines (published by the Cancer Institute)
  8. Caring for Someone with Cancer

Homemakers Need Insurance Protection Too

BT’s Crissy Demanuele highlights an under-utilised advice solution – noting that if unpaid childcare work was regarded as an industry, it would be three times the size of Australia’s financial and insurance services industry…

 

According to a BT Financial Health Index survey, homemakers are not as confident about their financial future as those who are employed. The survey also indicated that homemakers generally do not believe they have enough life insurance, don’t know how much insurance they need, or have not considered the benefits of insurance.

Homemakers include stay-at-home parents, part-time workers, or employees on a break before returning to the workforce. As BT’s survey indicates, some of these clients do not always understand the importance of life insurance and the types of cover which may be suitable to them.

Helping clients with understanding how life insurance can protect and support homemakers is a valuable part of an holistic approach to providing financial advice – one that takes into account the entire family.

When doing the calculations, advisers are sometimes surprised to find that the cost of replacing someone to provide childcare, transportation, household cleaning and cooking, along with family management, can be higher than replacing employment income.

A PwC report estimates that the value of unpaid childcare alone is $345 billion; and if unpaid childcare were regarded as an industry, it would be the largest in Australia, almost three times the size of the financial and insurance services industry (in 2011 terms).

There is a range of life insurance policies suitable for people who fall into the category of ‘homemakers’. Depending on the client’s circumstances, the client may even be eligible for occupation-based cover.

‘Home duties’ policies

Contrary to what some clients may believe, most retail insurers offer specific income protection and total and permanent disability (TPD) policies for clients performing home duties. Generally, they are aimed at individuals who are wholly involved in performing home duties, or those that engage in less than 20 hours of paid work a week.

If the client is temporarily disabled and unable to perform home duties, a home duties income protection policy can provide relief; for example, BT provides a monthly benefit of up to $5,000. This amount can be used to pay for a professional such as a cleaner or nanny.

The underlying definitions are aligned with day-to-day tasks carried out by a stay-at-home parent.

Occupation-based policies

Where a client works 20 hours or more per week, then they may be eligible for occupation-based cover, which has more expansive coverage than home duties cover. TPD cover can be based either on their current occupation, or any occupation for which they are generally suitable (based on their career history).

Where the TPD policy is held outside superannuation, a broader definition allows the possibility of a claim if the insured person is still able to work, but is employed in a role that pays less than 25 per cent of their previous earnings.

Home duties vs occupation-based cover

As the ability to access certain types of policies is determined by the client’s hours of work, often it is not a choice as to whether a home duties or occupation-based policy can be offered – it is one or the other.

However, when a client is planning on taking a break from the workforce or wholly assuming responsibilities in the home, this raises the question as to what type of cover should be recommended, given that hours of work may change in the future.

Acquiring cover during pregnancy

For life and trauma benefits, unless there has been a history of complications, cover will usually be considered at standard rates. Therefore, unless there is a history of serious medical complications, pregnancy should not be a factor in determining whether cover is available.

For TPD benefits, like life and trauma, unless there has been a history of complications, cover will usually be considered at standard rates. However, if the client is more than 30 weeks pregnant (or, for some insurers, defined as being in the third trimester) then attaining cover may be more limited.

Some insurers will not approve TPD under an ‘any occupation’ or ‘own occupation’ definition, instead requiring the policy to be issued with a ‘home duties’ TPD occupation. Others may not offer cover or will defer a decision until after the birth.

Depending on the insurer, income protection cover is usually available for employed expectant mothers up until the 30th week of pregnancy or up to the third trimester. Once past this point, most insurers will not offer cover, and will defer a decision until after the birth and the mother has returned to employment.

What should be noted is that if a client obtains occupation-based income protection cover, and subsequently goes on maternity leave, this may impact the ease of, and ability to claim.
Therefore, if given the option, what is the most appropriate form of cover, occupation-based or home duties cover? As occupation-based cover provides broader definitions; if available, this is the preferred type of policy. This will mean that when your client returns to work, they will have the appropriate type of cover in place already.

Protecting your client’s children

When giving advice to clients on how life insurance can protect families, a type of cover that advisers may wish to consider is ‘Child trauma cover’. Many parents are unaware of the importance of having this cover. However, in most cases, when asked what they would do if their child became seriously ill, almost all parents agree that they would want to care full-time for their child.

This may force the parent to cease work or, if they are a homemaker, require them to pay other people to assist them with looking after their home and caring for other children. It may also involve expensive medical costs.

Child trauma cover provides a lump sum benefit if the insured child is diagnosed with a serious medical event or critical illness. Different policies cover different medical events, such as: brain damage, cancer, kidney failure, loss of limbs and terminal illness.

Conclusion

Clients often understand the importance of having life insurance when they are working, but may be less aware of the relevance of life insurance when they are a homemaker (or if their spouse is a homemaker).

Increasingly, parents are juggling both work and home duties, which means there are particular considerations for risk advisers looking for strategies to meet the needs of this diverse client segment, during different life stages. Smart strategies can ensure comprehensive cover that changes and adapts over a client’s lifetime.

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