Life Insurance Costs in Australia vs South Africa: What You Need to Know
Typically, the cost of life insurance is influenced by the amount of risk payout you want and your personal risk profile, including factors such as age, smoker status, job, and other health conditions. A life insurance company would price a payout of AUD 1 million or R 10 million based on your risk profile. However, despite various comparisons, there is little reason why the cost of the same value of cover and the same risk profile would differ significantly between Australia and South Africa.
The Cost of Life Insurance
The main factors influencing the cost of life insurance are typically the individual's risk profile and the exact amount of the payout. For example, a life insurance company might price a payout of AUD 1 million at around R 10 million, based on the same risk profile in both countries. Therefore, the cost should be relatively similar, irrespective of the geographic location.
Taxation Differences
One of the significant differences between these two countries lies in the taxation of insurance payouts and life insurance premiums. For instance, one country may tax insurance payouts at 25%, whereas the other may not have any taxes on payouts or allow you to deduct life insurance premiums from your tax liabilities. These differences can significantly impact the cost, especially from a post-tax perspective.
According to the Deutsche Bank 2014 report on world prices, Australia is positioned as the most expensive economy in the world, with a relative price level of 145 compared to the US benchmark of 100. South Africa, on the other hand, has a relative price level of 54. While the report does not provide specific life insurance prices, it does offer health insurance prices as a proxy. The annual cost of health insurance in Australia is reportedly around 145% of the US benchmark, and in South Africa, it is approximately 54%.
Comparison with Health Insurance
The comparison in health insurance costs between Australia and South Africa sheds light on the relative living costs in each country. Although the report does not provide direct life insurance cost data, it offers a reasonable proxy. This differential in health insurance costs suggests that Australia generally has higher living costs than South Africa, which might also affect the general cost of life insurance.
It is essential to understand that the cost of living in Australia is about double that in South Africa. This means that the cost of insurance claims would naturally be higher in Australia due to the increased cost of living. However, the risk of violent death or certain diseases such as AIDS is significantly lower in South Africa, resulting in a different risk profile for each country. Average life expectancy in Australia is 83 years, whereas it is only 61 years in South Africa. This disparity in life expectancy also affects the risk assessment and, consequently, the cost of life insurance.
Conclusion
The cost of life insurance in Australia and South Africa should not significantly differ for the same value of cover and the same risk profile. However, the taxation on insurance payouts and premiums can greatly impact the overall cost. Additionally, the cost of living in Australia being higher than in South Africa influences the potential cost of insurance claims. Therefore, when deciding on life insurance in either country, it is crucial to consider not only the pricing but also the tax implications and individual risk factors.