In 2006 Pamela took out a funeral insurance policy. She told the telephone salesman that she could afford premiums of $30 per fortnight. She was told that if she took a “stepped premium” the premiums would increase only by “little amounts” each year. She initially took out a policy for $7000 cover at premiums of $30.63 per fortnight.
By 2013 the premiums had risen to $62.97 per fortnight (a 100% increase), but her cover is only $8500 (a 20% increase).
Throughout this period Pamela’s only source of income was the aged pension. Her situation now is that after paying for her nursing home accommodation and funeral insurance, Pamela has $10 per week to live on. The premiums are expected to rise again next year and the policy will soon require more to be paid in premiums than she has each month after nursing home care. When that happens Pamela will be forced to cancel her insurance policy and all of her payments will be lost.