The price is right

Posted by: Naomi Ballantyne on 26 May 2007

Naomi Ballantyne, Managing Director of ING Life, draws on her years in the life insurance profession to examine the interesting attitude we have towards insuring our own lives against the unexpected.

During my years in the life insurance profession, one of the things that has always fascinated me about consumer behaviour is the interesting attitude we have towards insuring our own lives against the unexpected.

We don't seem to ever question the need to insure our houses, cars, boats and chattels. We view these types of insurance as a necessity and we also seem to accept that the price of these insurance will increase on a regular basis. While we may grumble about such price increases, we will generally keep renewing these polices.

Yet, when it comes to insuring our own lives we suddenly become very reluctant to put the required cover in place and we also become acutely focussed on cost!

Perhaps it's because, under the surface, we are all reluctant to confront the possibility that we may not live the long, healthy lives we all wish for.

But whatever the reason, people are far less keen to insure themselves than they are to insure their chattels. They also seem to be much more willing to cancel their life insurance contracts when prices increase than they are their car insurance, for example.

While we can understand the emotional reluctance to accept the risks we all face to our health and longevity, the fact remains that the financial burden placed on our families if we die or become disabled during our working lives is likely to be significantly greater than the loss of a chattel could ever be.

It is our ability to earn an income that is, at the end of the day, our greatest financial asset. It makes perfect sense, therefore, to insure against any risk to our ability to continue to produce that income.

Why is it that we accept increasing car insurance premiums, even though the insured value of our vehicles decreases each year - yet we are quite likely to cancel our disability or life insurances as soon as the premiums increase?

Life insurance premiums increase when the overall risk of claims increases over that which had previously been calculated. This means that more people than expected have made claims, or that actual claims have lasted longer than expected and premiums must therefore increase to reflect these increased claims risks.

When you compare the premium costs of insuring your life or income against the significant financial benefits payable on a claim, it is easy to see the true value of these products.

Continuing on that theme, when you compare the premium payable for the relatively large sums insured (provided under life insurance contracts) with the annual costs of insuring a car, for example, it is difficult to understand why anyone would consider cancelling their life insurances at any time during their working lives.

After all, the older you get, the higher chance there is that you may have to make a claim against your policy.

So the next time you receive a notice advising you that your risk protection premiums are to increase, take the time to consider just how much value you are provided by these contracts and accept that the price you are being asked to pay is a fair price for that value.

Don't let your reluctance to accept your own mortality prevent you from protecting your family against the financial burden that is sure to come with the loss of your income.

- By Naomi Ballantyne, Managing Director of ING Life