Pack your life insurance these Christmas holidays

Pack your life insurance these Christmas holidays

For many people going on holidays this Christmas, travel insurance is a no-brainer.

As surely as they pack underwear, savvy travellers ensure they’re adequately covered against accidents and medical expenses as well as cancelled flights and lost luggage.

Ironically, when it comes to their everyday life, only a fraction of Australians have life insurance which includes income protection, trauma and total and permanent disablement (TPD) cover, to protect them and their families against accidents, injury, illness and death.

While there’s no doubt that travel insurance is a must-have before going away, it is no substitute for appropriate life insurance, especially when you consider the facts.

Each year approximately 1,222 Australians die in road accidents¹ and 36,000 are hospitalised due to road accidents2.

Last year, 291 people drowned in Australian waterways3 with a further 685 non-fatal drowning incidents resulting in hospitalisations4. Almost 40 per cent of these cases occurred in summer.5

A common misconception people have about travel insurance is that it offers the same, or similar, benefits as life insurance but travel insurance is not a match. For example, it only provides very limited income protection benefits.

This is important to understand given the average Australian earns approximately $82,000 per annum (AWOTE)6, equating to approximately $6,800 per month.  
 
The maximum total benefit payment under travel insurance is up to $12,000 for loss of income with the maximum monthly benefit being less than $1,800, or a mere 27% of AWOTE. 

Travel insurance policies also usually limit coverage to events resulting from injuries caused solely and directly by violent, accidental, visible and external means (not caused by a sickness or disease) resulting in a loss of income because of an inability to return to work7. By comparison, even basic life insurance policies (except accident-only policies) that provide income protection cover 75% of an individual’s income and protect against loss of income due to sickness, illness, injury or disease8

Conservatively, the personal, out of pocket costs of total and permanent disablement is $100,0009. TPD cover provided by travel insurance policies provide maximum benefit payments of $25,000 and are limited to specific conditions of: permanent and total loss of sight in one or both eyes; permanent and total loss of use of one or both arms; or permanent and total loss of use of one or both legs. Travel insurance permanent disablement cover also specifically excludes permanent disablement caused by sickness or disease10.

On the other hand, life insurance policies that provide TPD benefits cover: loss of independent existence, loss of limbs, loss of sight, and an inability to perform any occupation they are reasonably suited for based upon education training and experience. It can provide cover of up to $5 million11.

Finally, travel insurance policies only cover deaths caused solely due to accidents and limit the sum insured to $25,00012.  While approximately 10,709 people die each year due to accidents, this comprises less than 6.7% of the 160,909 deaths in Australia annually13. As an alternative, death cover (except accident-only cover) provided under life insurance policies provide minimum sums insured of $50,000 and cover deaths by any means14. Deaths due to suicide may be excluded under both types of policies.

 
Jeff Scott is Head of Product Strategy and Technical Support at ClearView.
 


1 National Road Safety Strategy – Road deaths by age group. Australian Road Deaths database as at 19 November 2018.
2 inquiry Into The National Road Safety Strategy 2011-2020, 27 September 2018.
3 Royal Life Saving - National Drowning Report 2017 – Inside Research And Policy Highlights. Page 1.
4 Royal Life Saving - National Drowning Report 2017 – Inside Research And Policy Highlights. Page 4.
5 Royal Life Saving - National Drowning Report 2017 – Inside Research And Policy Highlights. Page 8.
6 ABS Publications 6301.0 and 6302.0 ("Average Weekly Earnings"). Trend Full-time Adult Ordinary Time Earnings.  16 August 2018.
7 QBE Insurance (Australia) Limited Travel Insurance – Insurance Product Disclosure Statement and Policy Wording - Date of preparation: 1st May 2017 - Date effective: 1st July 2017 (QM1763-0717);  covermore Travel Insurance – Combined Financial Services Guide and Product Disclosure Statement – Effective 20 September 2017;  Medibank Travel Insurance – Combined Product Disclosure Statement and Financial Services Guide – Effective 1 June 2017.
8 Lifesolutions Product Disclosure Statement and Policy Document – Issue 4.  1 October 2018. Page 40-41.
9 The economic costs of heart attack and chest pain (Acute Coronary Syndrome). Access Economics. June 2009. Page 50.  
10 QBE Insurance (Australia) Limited Travel Insurance – Insurance Product Disclosure Statement and Policy Wording - Date of preparation: 1st May 2017 - Date effective: 1st July 2017 (QM1763-0717);  Covermore Travel Insurance – Combined Financial Services Guide and Product Disclosure Statement – Effective 20 September 2017;  Medibank Travel Insurance – Combined Product Disclosure Statement and Financial Services Guide – Effective 1 June 2017.
11 Lifesolutions Product Disclosure Statement and Policy Document – Issue 4.  1 October 2018. Page 16-17.
12QBE Insurance (Australia) Limited Travel Insurance – Insurance Product Disclosure Statement and Policy Wording - Date of preparation: 1st May 2017 - Date effective: 1st July 2017 (QM1763-0717);  covermore Travel Insurance – Combined Financial Services Guide and Product Disclosure Statement – Effective 20 September 2017;  Medibank Travel Insurance – Combined Product Disclosure Statement and Financial Services Guide – Effective 1 June 2017.
13 Australian Bureau of Statistics - 3303.0 - Causes of Death, Australia, 2017. Released at 11:30 AM (CANBERRA TIME) 26 September 2018.
14 Lifesolutions Product Disclosure Statement and Policy Document – Issue 4.  1 October 2018. Page 10-13.