Older lives still need cover

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The traditional view on life changes as we age is being challenged by various social factors. That, Russell Hutchinson says, is why insurance advisers need to consider offering life insurance products to the older generation.

Wednesday, October 2nd 2013, 8:55AM 1 Comment

by Russell Hutchinson

The standard model of insurance is one of declining needs as lives get older. It assumes a kind of fairy-tale financial life in which assets rise and debts fall as a ‘typical’ working life continues progressing towards the anticipated gold watch arriving at age 65.

Increasingly we are learning that this isn’t realistic. Life is complicated, and messy, and textbook renditions of life that work on average are the very opposite of the personalised advice approach that clients are looking for.

Here are four key trends which mean that our formulaic ideas about older lives may be out of date – and why they may in fact need that life cover after all.

Longer lives – because people are living longer many are working longer. That may be a reflection of the steeper fall from a full-time working income to New Zealand superannuation plus whatever has been saved, or it may just be out of choice. But if 65 was the equivalent of 80 at the turn of the century, then another way to look at it is that 65 is the equivalent of 50 in today. If people don’t feel that they are getting ready for retirement at age 55 then they will make decisions to grow, build, and do new things – and insurance is often a valuable part of that process.

New careers – being made redundant at 59 used to mean early retirement. Today it might mean that you start that business you have always wanted to run. Start a business, with business partners, borrow money, sign a lease, buy equipment, and start work on long-term contracts for clients… all this means is that you may well need to have insurance. Some business partners and clients may insist on it.

Grandparents looking after grandkids – if your grown-up children have a messy divorce, or medical problems, or want to go back to university, or are going to be a doctor on one of the mining camps in Western Australia (all cases I have heard of recently) then granny and granddad sometimes step in to look after the children. In such a situation the same drivers for insurance cover exist as if the kids were their own.

Asset mix – sometimes you just don’t want to sell a property, so you may borrow against it. Or you will want to make sure that the farm doesn’t have to be put on the market if you die, or you simply want to make sure that one party to your estate can be settled quickly. Insurance is a far more liquid asset than real property. So your asset mix can mean that you want to have cover even in your 60s and 70s.
What’s more the actual ownership statistics bear this out. The FSC’s recent report on underinsurance showed that 61.4% of 50 to 65 year-olds have the primary life in the household covered for life insurance, and that the number underinsured is 78% - not far off the 79% underinsured in the category of families with teenage kids.
 

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