Income protection insurance is an option many people choose to give them some financial security in the face of unforeseen circumstances like accident or illness.
Those figures apply to basic coverage that would pay 75 per cent of income for someone becoming incapacitated to age 65 on a salary of $60,000 a year. But the relativities are similar for different income levels according to information provided by advisory group Partners in Planning.
Another important variable in the cost of income protection is occupation. The more dangerous your job, the more you pay for cover as the insurer estimates you are more likely to claim.
The following table provided by research group Canstar demonstrates that fact. It shows similar gender relativities to the first table but shows that premiums for manual workers can be 60 per cent higher than their deskbound counterparts.
For people in their 20s, the gender differentials are much lower, typically between 20 to 25 per cent, according to the same Canstar research.
Why do women pay more?
In a world where gender financial equality is supposed to be a national aspiration if not a reality, the cost of income protection for women is a stark pointer to the contrary.
Stephen Mickenbecker, Canstar’s financial services director, says “as with all insurance, premiums are determined by the level of previous claims”. Women, he said, have more claims per head than men, boosting the cost of providing insurance for them.
This higher claims level is driven by a few factors relating to women’s health, Mr Mickenbecker said.
- Women’s policies can cover pregnancy and birth problems which are obviously not an issue for men.
- Women have a higher likelihood of suffering musculoskeletal problems and where they do, treatment can last much longer than for men.
- Women have a higher propensity to mental and emotional illnesses than men, which can lead to more time off work.
- Female cancers are likely to strike earlier than the cancers men are prone to.
These factors added together make women more costly propositions for insurers to cover than men.
Susan Jackson, principal of advisory group Women’s Financial Network, said such factors, along with an incentive for women with children to stay on claims longer, are the drivers of the phenomenon.
“If you’re on (a claim receiving) 75 per cent of your salary and have young kids, you might be more inclined to take the doctor’s advice that you need another month off than if you are a single with a mortgage who feels under pressure to return to work,” Ms Jackson said.
Another factor lies in history, where a lot of women were not in the workforce. As more women moved into work, those more motivated to take up income protection were those who may have had a family history of genetic diseases like some breast cancer, a cohort with a higher risk, Ms Jackson said.
“Insurance works on a pool arrangement, so in that situation the percentage of claims by women will be higher.” Ms Jackson said.
The figures shown apply to income protection insurance outside superannuation. Some industry super funds offer income protection on the same basis to men and women. AustralianSuper, for example, has a stable number of about 700,000 members with income protection.
Using its online insurance tool, income protection insurance for a worker on $80,000 a year covering to age 65 would cost between $47.20 a month for a 30-year-old and $136 a month for 50- and 60-year-olds.
Some super funds, however, do charge a premium differential for women. Paul Pelligrino, managing partner with Partners in Planning, said comparison of insurance policies is difficult as conditions and coverage vary.
Policies inside super are attractive as they are paid for out of contributions while policies outside super attract some charges as they are tax deductible.
While women pay more for income protection they pay less for life insurance as they live longer, Mr Mickenbecker said.