With so much conflicting information published on life insurance, both from Australia and abroad, it is easy to see how some widespread misconceptions can develop around this product. Understandably, these misconceptions may be a contributing factor to Australia’s current underinsurance crisis. It is time to sort fact from fiction.
1. Life insurance providers rarely pay out claims
The insurance industry is often shadowed by horror stories of unsuccessful claims and this downplays just how much life companies pay out each year. In 2011 alone, AMP paid over $335 million in claims to policy owners and AIA paid a total of $1.7 million to customers every working day.
What many people don’t realise is that insurance companies are built around their reputation and the success stories that come following a claim. There really is no reason for a claim to be rejected if the claimant is within the conditions laid out in the product disclosure statement. Nevertheless, it is still crucial for every applicant to be crystal clear on what events are covered to avoid any nasty claim shock.
2. If one company turns down my application, they all will
Each insurance company has different criteria for assessing applicants and determining the level of risk that they present. The competitiveness of the insurance industry has made insurers become more flexible around what applicants they will provide cover to and some providers will offer revised terms for certain cases. If one company does not offer cover there is no reason to believe that this will be the case across the entire market. An insurance consultant can help buyers find competitive cover with policy conditions suitable for each situation.
3. I have life cover in my super, I don’t need to consider other cover
The reality is that the default cover provided in super funds is rarely enough to cover all necessary expenses. It’s also important to be aware that the types of cover available can be limited and tax can be payable on some benefit payments.
It is essential for people to determine just how much cover is in their super and if they could benefit from the tailored features of a more comprehensive standalone policy.
4. I am protected by Workers’ Compensation insurance, there’s no need to consider income protection
While Workers’ Compensation insurance may provide support for injuries and illness sustained at work, what about cover for accidents that occur at home or at weekend sport? Many people will be forced to take time off work due to illness or injury and relying on cover only provided for work related injuries is leaving them greatly exposed. Additionally, conditions of benefit payments vary from state to state with benefit periods for workers compensation available between 13 weeks and 9 years. Income Protection applicants generally have the flexibility of choosing a benefit period of 1 year, 2 years, 5 years or to a specific age up to 65.
5. Life insurance is too expensive
Many people are shocked when they find out how affordable life cover can be after taking the time to make a comparison of policies. There are literally hundreds of policy options available with features tailored towards different buyers. Spending time to assess how much cover you actually need and trimming expensive extras off a policy can save thousands over the term of a policy. As an example, a 35 year old Male Non-Smoker looking for $500,000 in Life Cover could find protection for just $31 a month*.
An insurance consultant can help you find an affordable policy by helping you compare the market and hunt out policy discounts and offers for free policy features.
*Based on an example of a 35 year old male, who works as an accountant, looking at $500,000 of coverage. Average monthly premium of featured products on LifeInsuranceFinder.com.au