When it comes to insurance, I have always believed it’s better to have more than you need than not to have enough.

It is common knowledge that everyone needs to insure their cars, their homes, and anything precious, from their pets to their bicycles. The pandemic has, however, led to women becoming more interested in income protection policies – ones that protect individuals and their families if the worst happens.

In the case of COVID-19, we witness a textbook example of what is known as a ‘black swan’ – something that once thought impossible suddenly appears yet causes severe and long-lasting consequences. Death, illness, and job losses have taken a toll on millions of lives. As a consequence of the struggles, many have had more time for reflection and have made better choices.

Many have taken out protection insurance so they can cover their mortgages and living costs or provide financial support to their loved ones in the event of another black swan. For people who accumulated additional savings during the lockdowns, purchasing these policies was a smart way to put their money to work.

But which gender pays more in terms of insurance, men or women?

There is already a gender pay gap of almost 14.4% for women. Furthermore, there is a possibility that the so-called pink tax will consume the difference in average weekly earnings between women and men.

Women often pay a higher price for certain services and products, particularly those related to personal care. Nevertheless, gender-based price discrepancies are not confined to toiletries. For instance, women pay higher insurance premiums than men. On some types of insurance, women, rather than men, are the ones pocketing the savings.

Income Protection

Women may pay more in this area than men. This type of coverage provides a regular monthly payment equivalent to roughly 70% of your salary or wage if you are unable to work for a few days or weeks. Whether women pay more varies depending on which insurance provider they use, as well as whether their coverage is organised in or out of super.

You would think that, since women tend to live longer than men, they would be less likely to make insurance claims, resulting in lower premiums. Unfortunately, this isn’t the case. A shift in pricing favours women between the ages of 35 and 40. Upon digging deeper, I discovered that this is due to the fact that – wait for it – women take better care of their health than men do.

Premium gaps, however, are not driven by gender bias. It is statistically more common for women to claim income protection and to remain out of work for longer periods. Among men, accidents cause 38% of claims compared to 28% for women, according to the Financial Services Council. Women make up one in five (17%) of all claims for mental health, compared to men, who make up just 10%. Also, women usually pay more for trauma insurance. Aside from the higher risk, women’s anatomy makes recovery time longer. Typically, men are eligible for insurance claims only if they are injured in accidents or become seriously ill. On the other hand, women can file claims due to pregnancy, which often occurs. Claims frequency tells us more.

Usually, if a woman feels a lump in her breast, she’ll go to her doctor to check it out and obtain treatment. Conversely, and here we are speaking in generalisations, men are more likely to ignore a lump or ailment. The life insurance industry, however, knows that women are more likely to seek help. Consequently, there are going to be more medical treatments required and more costs incurred. Therefore, the cost for women is higher. Many male-dominated jobs also have a high level of danger in them. In other words, it makes sense that men would also pay more to reflect this higher risk profile. This is seldom the case.

Further, the insurance industry generally believes that women’s bodies are more complicated than men’s, resulting in an increased risk of illness and time off work. In addition to increasing premiums, it also emphasises why women should insure their income. Income protection insurance premiums are usually tax-deductible, even if purchased outside the super system. If you earn a high income, you can often halve the cost. Nevertheless, many women already have coverage through their pension funds.

There are 3.4 million MySuper accounts with income insurance, according to the Australian Securities and Investments Commission (ASIC). Income cover may be included as a default option in other types of accounts, or you may need to opt in and pay an additional fee. Depending on your fund, you will know what you have – what’s covered and how much it will cost to add income insurance.

There’s no surprise that more and more women feel the need to protect themselves from financial hiccups. Organisation for Economic Cooperation and Development (OECD) initially warned that women would suffer greater losses from the pandemic than men – a trend was seen during previous pandemics.

In Britain, these predictions came true because women have accounted for the majority of workers on the government’s furlough scheme, as well as 57% of workers in shut-down industries. Women were largely responsible for looking after their children when schools closed, adding to the burden of unpaid work.

Life Insurance

Among the areas in which women pay lower premiums is life insurance. There is a simple explanation for this: women live longer.

As per the Australian Bureau of Statistics, the average life expectancy of women is 85.3 years, while that of men is 81.2 years. However, premium differences go beyond longevity. A super industry body reports that men have higher death rates than women, regardless of age. Life insurance companies take heed of that. Because women are less likely to file a claim, it can result in lower premiums for them.

Life insurance today is more affordable for women because of the life expectancy gap. But in the future, that may no longer be the case. Surprisingly, the difference between the genders in life expectancy is closing. Compared with today, women averaged seven years longer life expectancy in 1990 than men. Over time, this could lead to a more level playing field regarding life insurance premiums.

If you purchase life insurance through your superannuation, the gender price gap becomes less obvious. Australia’s Securities and Investments Commission (ASIC) examined the annual premiums offered by 20 MySuper funds for default life insurance that includes total and permanent disability (TPD) insurance in 2020. In terms of women paying less for life insurance, there was no definitive answer. It was common for both men and women to pay the same premiums. Women, however, were clearly in the lead with other insurance companies, such as CareSuper, where a 40-year-old would pay $529 annually versus $617 for a man in the same age group.

Bridging the gap

Engagement with insurance inside superannuation is an area where women tend to lag behind in life insurance. The MetLife study found that two out of every three women know how much coverage their pension fund provides versus three out of four men.

As a result, both men and women tend to be unclear about what they pay in insurance premiums through their superannuation. A majority of both genders overlook the possibility of altering the amount of personal insurance held through super. Check your most recent super statement or contact your fund to find out how much coverage you have.

When women seek to increase their life insurance coverage through their super, the problem is that they have to pay a higher premium – money that comes from retirement savings. This is problematic since women usually enter retirement with less money than men. By increasing the amount of insurance coverage, this gap is likely to widen. Ideally, you should compare insurance costs in and outside of super and, importantly, know what kind of coverage your policy provides. There are some policies through MySuper that are as low as $40 per year in premiums but only pay out a maximum of $40,000 if you make a claim.

Health insurance

Take Australia, for instance; almost six out of 10 women have health insurance. In this case, the cost will be determined by your needs rather than by your gender. Compare the Market’s Anthony Fleming points out that some insurance policies are “risk-rated” whereas others, such as health insurance, are “community-rated”.

He says health insurance plans in the same state are “community-rated”, which means all policyholders of the same age and gender will pay the same premium. “Golden policies, however, may be more popular with women since they cover maternity and fertility services.”

Certainly, not all women need or want maternity care or fertility treatments. If you’re unhappy with the price of your policy, you may want to shop around to see if you can find better coverage for less or a policy better suited to your needs.

Car insurance

There are many blanket statements we hear about how women are less likely to pay for car insurance. But that isn’t always the case.

In spite of making up almost half of all road users, women are less likely to be involved in serious accidents. According to NSW figures, 7415 men were hospitalised as a result of serious road crashes in 2020, more than twice the 3560 women.

We’re not talking about women being “better” drivers than men. Rather, it may be a function of their driving habits and road use. Women tend to drive on congested roads less often than men, according to Budget Direct. This might be explained by the fact that the transport industry (including taxis and couriers) is dominated by men.

Does this mean that women pay less for car insurance? It depends on what company you choose. Most of the time, the difference would amount to the price of a takeout coffee.

Wrapping Up

In an interesting development, the cost of comprehensive cover is the same for both men and women. There is a key takeaway here that women may need to pay more for some types of coverage. When it comes to other types, it is men who have to dig deeper into their pockets. The important thing is to have adequate coverage. Besides comparing rates, you should scrutinise the fine print of a policy to know what kind of protection you’re getting and how much money you’ll receive if you file a claim.