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.

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If you have any questions about your insurance, speak to your financial adviser or call AMP Life.

AMP Life

Monday to Friday 8:30am – 7:00pm (AET)

Important information

Products in the Super Directions Fund and the Wealth Personal Superannuation and Pension Fund are issued by N.M. Superannuation Proprietary Limited (N.M. Super) ABN 31 008 428 322 (trustee), which is part of the AMP group (AMP). Before deciding what’s right for you, it’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions available from AMP at amp.com.au or by calling 131 267. Read AMP’s Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

Products in the AMP Eligible Rollover Fund, National Mutual Retirement Fund, and NM Pro Super Fund are issued by Equity Trustees Superannuation Limited ABN 50 055 641 757 (trustee). Risk products are issued by AMP Life Limited ABN 84 079 300 379 (AMP Life), which is part of the Resolution Life group. AMP Life has proudly served customers in Australia since 1849. AMP Limited ABN 49 079 354 519 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. Before deciding what’s right for you, it’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions available from AMP Life at amp.com.au or by calling 133 731. Read AMP Life’s Financial Services Guide for information about our services, including the fees and other benefits that AMP Life and/or other companies within the Resolution Life group may receive in relation to products and services provided to you.

Any advice and information provided is general in nature, hasn’t taken your circumstances into account, and is provided by AWM Services Pty Ltd ABN 15 139 353 496 (AWM Services), which is part of the AMP group (AMP). All information on this website is subject to change without notice.

Life Insurance Code of Practice

The Life Insurance Code of Practice is issued by the Financial Services Council (FSC) and sets out the life insurance industry’s commitment to high customer service standards, consistency and principles of conduct.

As a member of the FSC, AMP supports the Life Insurance Code of Practice. You can find more information here.