When household budgets are under pressure, it is natural for families to look for ways to cut back. Streaming subscriptions, takeaway dinners and discretionary purchases are often the first to go. Unfortunately, life insurance is sometimes put on the chopping block, too.
Brad Berman, Senior Risk Adviser at Orbital Life, explains why that can be a costly mistake – and why, in times of economic uncertainty, maintaining or even increasing cover may be one of the smartest financial decisions you can make.
Remembering Why You Took Out Cover
The starting point when clients consider cancelling is to go back to the need. Why did they take out cover in the first place? Insurance exists to protect families and businesses from the financial shock of death, illness or disability. When economic conditions are unstable, the “what if” questions become sharper: how would my partner pay the mortgage, or how would the business keep going if I could not work?
“Often it’s a knee-jerk reaction to say insurance is expensive,” says Brad. “But once we review their needs and show what the cover is actually protecting, most clients keep it – sometimes with small adjustments.”
When More Cover Makes Sense
Surprisingly, tougher times can lead some clients to increase their protection. For example, self-managed super fund trustees or property investors may decide to fully cover their debts so their family has liquidity if something happens. Others may increase income protection to the maximum, especially if employment feels less secure.
“In uncertain markets, property values may fall, rental income can be unstable and overheads can mount. That uncertainty makes people realise they want complete protection,” Brad explains.
What Happens in the Insurance Market
Does economic pressure make premiums cheaper? Not necessarily. Insurance is priced on actuarial models, claims experience and risk pools. Rising mental health claims, for instance, can push premiums up.
The good news is that advisers like Orbital Life can often negotiate with insurers. “We’ve got insurers knocking on our door wanting to do business and we’ve developed a reputation within the industry for building partnerships based on integrity and trust. These relationships can often help us to get better outcomes for clients,” says Brad.
The Risks of Cancelling Cover
Walking away from existing cover comes with real dangers:
- Health changes: Once cover is cancelled, any new medical conditions can make it harder – or impossible – to get the same terms again.
- Lost grandfathered benefits: Older income protection policies may pay significantly more than what is available under new rules. Once cancelled, they cannot be reinstated.
- Level premiums: Clients who locked in lower premiums years ago risk losing those savings forever.
- No “welcome back” discounts: Unlike Netflix, insurers do not offer cheaper rates if you return. You reapply from scratch, at an older age and with whatever health changes have occurred.
“Cancelling should be the very last option. More often, we help clients reduce cover slightly, remarket it for better value, or shift ownership into super so they keep it without impacting household cash flow,” Brad says.
Business Owners vs Employees
For business owners, insurance can be critical to shareholder agreements, key person protection and debt cover. Policies may be structured as business expenses, making them easier to maintain through uncertainty. For employees, cover is often best held via superannuation, with salary sacrifice contributions helping to offset the cost.
Practical Tips in Tough Times
Brad’s advice goes beyond insurance. He encourages clients to “stop, think, breathe” before making decisions.
- Budget first: Review household spending, including discretionary items such as multiple streaming services. Small cuts there can free up enough to keep essential cover in place.
- Seek expert guidance: Talk to your accountant, financial planner or lawyer about structuring premiums, maximising super contributions or updating your will.
- Keep perspective: Insurance is not a luxury – it is the safety net that protects everything else.
A Final Thought
Economic uncertainty can tempt people to reduce their protection, but it is also the moment when cover may matter most. As Brad notes, “People just want to feel heard. When we walk through their options, most keep their cover, and they feel more secure knowing their family or business will be looked after.”
At Orbital Life, we believe in thinking long-term, not short-term. The right advice today can protect you from risks tomorrow.