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Ensuring insurance keeps up with the cost of living

Life insurance can be invaluable in protecting you and your family’s future, safeguarding your income if something goes wrong – so it’s important to make sure your cover keeps up with the cost of living. Otherwise, depending on your circumstances, you could risk not having enough cover.

One way to make sure your cover keeps up with inflation is through indexation, which means choosing to increase your cover by a small percentage each year. This way, if you need to claim on your life insurance, the payment you receive will align with the current cost of living as measured by the Consumer Price Index (CPI).

It’s a good idea to speak to your financial adviser about how inflation may impact your personal circumstances, so you can decide whether indexation is right for you.

How is indexation measured?

Indexation is worked out using the Consumer Price Index (CPI), which measures the cost of living against the prices of this basket of goods:

  • Food and non-alcoholic beverages
  • Transport
  • Alcohol and tobacco
  • Communication
  • Clothing
  • Recreation and culture
  • Housing
  • Education
  • Furnishings, household equipment and services
  • Insurance and financial services.
  • Health costs
  • The CPI is published by the Australian Bureau of Statistics (ABS) once a quarter.

Whenever the average price of these goods and services goes up or down, the CPI is adjusted. This graph shows the rises and falls in CPI over the last decade. As you can see, even though Australia’s rate of inflation has been fairly low over the last five years, it’s clear that inflation can rise significantly over the longer term.

Measures of consumer price inflation

Source: RBA, Measure of Consumer Price Inflation, 29 January 2020

How indexation works

With AMP Life insurance policies, indexation is an optional feature. So, depending on the product, you can choose to switch it on and off at any time. It won’t affect what you’re covered for, just the amount you’ll be paid as a benefit.

It’s important to note that if your sum insured is indexed, your premiums will increase every year. But this means you’ll also receive a larger benefit if you make a claim.

If you choose indexation, we’ll apply it at every policy anniversary. The way it’s applied depends on the life insurance product, generally your product may have:

  • For insurance policies that pay a lump sum (like life, TPD or Trauma cover), the annual indexation amount is either 5% or the increase in CPI – whichever is greater.
  • For insurance policies that pay out over time (like Income Protection cover), the annual indexation amount is either 3% or the increase in CPI – whichever is greater.

Find out more:

If you have any questions about your insurance:

Important information

AMP Life Limited ABN 84 079 300 379, AFSL No. 233671 (AMP Life), has proudly served customers in Australia since 1849. AMP Limited ABN 49 079 354 519 (AMP Limited) has sold AMP Life to the Resolution Life group whilst retaining a minority economic interest. AMP Limited has no day-to-day involvement in the management of AMP Life whose products and services are not affiliated with or guaranteed by AMP Limited. AMP Limited is not liable for products issued by AMP Life or any statements or representations made in the PDS for those products. “AMP”, “AMP Life” and any other AMP trademarks are used by AMP Life under licence from AMP Limited.

Any advice and information on this website is general in nature and is provided by AMP Life, which is part of the Resolution Life group. The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice, having regard to those matters as well as the relevant product disclosure statement (PDS), available from AMP Life at amplife.com.au or by calling 133 731, before making a decision about the product. Consider speaking to a financial adviser if you have any concerns.

If you decide to purchase or vary a financial product, AMP Life and/or other companies within the Resolution Life group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium they pay or the value of their investments. You can ask us for more details. 

AMP Life is part of the Resolution Life group and can be contacted on 133 731 or via the contact us page.