Why is life insurance important in retirement?
Last updated on 31 January 2024
Key points:
- In 2020 – ‘21, 34 percent of retired women relied on their partner’s income to meet their living costs at retirement — compared to seven percent of retired men
- Of the 140,000 people who retired in 2020, the average age at retirement was 64.3 years
- For men, the average age of retirement was 65.4 years and for women, the average was 63.7 years
In Australia, the main factor that will influence the decision about when to retire is financial security. For couples, coordinating retirement, pension rates and superannuation income can determine the ongoing financial stability of retirement living, accommodation and cost-of-living expenditure.
Insurance is a gamble at any stage in life, as it can offer relief when needed at the cost of ongoing payments that vary depending on the level of coverage required.
The average age of retirement for men and women in Australia is 65.4 years and 63.7 years of age, respectively, as of 2020 – 2021. Similarly, the life expectancy of a 65-year-old man in 2019 – 2021 is 85.3 years and a woman of the same age has an estimated age at death of 88 years.
However, life expectancy is a somewhat misleading metric for determining how long you need to work, save and continue to support yourself and those around you, as the life expectancy of a person increases as they age. Making it to 65 is a predictor of making it to 80, making it to 80 is indicative of making it to the age of 90, et cetera.
The distribution of mortality age varies drastically across Australia, as death can occur at any age and it helps to prepare for the unexpected.
Additionally, for retired couples who coordinate their income and pay for health, contents, home and vehicle coverage, the thought of paying for life insurance can seem like an unnecessary expense compared to the essentials, such as health scares and transport.
Life cover is among many different forms of coverage such as income protection, total and permanent disability and trauma cover. Accidental death coverage also differs from life cover and does not pay out for cover if you die from an illness, disease or suicide.
Life insurance can allow you to nominate beneficiaries, such as dependents or a life partner, who will receive a lump sum that is paid out upon your death. This lump sum can be essential for the costs of burial, funeral and managing debt repayments.
The Australian Government’s MoneySmart Life Cover calculator can help you determine what kind of coverage you need and the package types that are available to you.
Life cover may be cheaper, accessible or bundled through your super provider, so it is important to discuss package options with your current insurer.
The average cost of a basic burial in each Australian State and Territory varies and according to The Cost of Death Report 2.0 conducted by Australian Seniors:
- A basic burial in metropolitan South Australia will cost: $12,054
- A basic burial in regional South Australia will cost: $10,301
- A basic burial in metropolitan Tasmania will cost: $11,784
- A basic burial in regional Tasmania will cost: $11,046
- A basic burial in metropolitan Western Australia will cost: $11,621
- A basic burial in regional Western Australia will cost: $7,501
- A basic burial in metropolitan Victoria will cost: $18,652
- A basic burial in regional Victoria will cost: $8,591
- A basic burial in metropolitan Queensland will cost: $12,991
- A basic burial in regional Queensland will cost: $8,853
- A basic burial in metropolitan New South Wales will cost: $17,722
- A basic burial in regional New South Wales will cost: $10,538
- A basic burial in the Northern Territory will cost: $11,672
- A basic burial in the Australian Capital Territory will cost: $16,154
Consider discussing what level of coverage and payment plan works best for you with your current insurer and superannuation service for a stress-free retirement.
Have you considered life cover as a retirement necessity? Let the team at Your Retirement Living know and subscribe to the free weekly newsletter for more information, news and industry updates.
Related content:
Mentally preparing for death and dying