Should low income earners pay more for their life insurance?
It is a grim fact that men classified as having ‘low income’ will die on average 6.5 years younger than higher earners. And for women, this gap is 4.7 years.
This means that low income men and women are at higher risk for life insurance… in the same way that smokers are higher risk for life insurers… and low earners (technically) like smokers should pay more for their life insurance cover.
I started thinking about this issue when a report from Otago University caught my eye.
According to this report, the life expectancy gap between rich and poor in New Zealand is not only significant, it’s widening! Over the 20-year period from 1981 to 2001, life expectancy for high earning men increased by 2.1 years and by 1.4 years for women.
So, do we believe that life insurance companies in New Zealand will at some point introduce a question on the Life Insurance application form along the lines… “How much do you earn?”
Nope, never! (And nor should we.)
Yet… (believe it or not) it does happen in some countries… South Africa being a case in point.
If you apply for life insurance in South Africa, you will typically be asked to declare both your level of education and monthly income on the application form. If your level of income and/or education is low, you’ll be quoted a higher price for your life insurance!
Talk about kicking someone when they're down! Tough place Africa.