INSURANCE MYTHS BUSTED

 

Today, we will dismiss some of the most common myths about life insurance, so you are able to make a well-informed decision about your cover.

MYTH # 1 – LIFE INSURANCE COMPANIES DON’T PAY CLAIMS

There’s a common perception that life insurance companies will do everything they can to avoid paying claims. In fact, 92% of all life insurance claims are paid in the first instance. As long as you fulfill your duty of disclosure when you apply for cover, and you’re covered for the medical condition you’re claiming for, you can be confident your claim will be paid.

 MYTH # 2 – I'M YOUNG AND DON’T HAVE KIDS OR A MORTGAGE, SO I DON’T NEED IT

Life insurance isn’t all about providing for debts and dependents. It’s also about looking after yourself.
Think what would happen if you became ill or disabled and couldn’t work. If you didn’t have income protection, you’d have to find another way to supplement your income – through friends or family. Having income protection means that you are more likely to be able to manage on your own.
There are benefits to applying for life insurance when you’re young and healthy. It’s generally cheaper and it means you don’t have to worry about getting cover later if your health changes (see myth #3).

MYTH # 3 – I WON’T BE COVERED IF MY HEALTH CHANGES

Once you start your cover, what you are covered under your life insurance for won’t change – even if your health declines. In fact, you generally don’t even need to tell your insurer about a change in your health unless you intend to make a claim.

MYTH # 4 – YOU HAVE TO DO LOTS OF MEDICAL TESTS TO GET COVERED

Some life insurance products sold through financial advisers require some medical tests before you get covered, but it may be as simple as one blood test and a GP examination.

·    If you have an existing medical condition, you may be asked to provide extra information about your condition and insurers will generally write to your doctor for a report rather than require tests.

·        You generally won’t be covered for pre-existing conditions, so it’s important to establish upfront what those pre-existing conditions are. It’s important to answer all questions accurately upfront so any pre-existing conditions can be reviewed by your insurer for any impacts to your cover or ability to obtain cover.

·         That way you know exactly what is and isn’t covered under your policy.

MYTH # 5 – I’LL BE STUCK PAYING FOR COVER I DON’T NEED

Life insurance is designed to change as your life changes, as your cover needs can vary significantly over your lifetime. An example may be when taking out life insurance when getting married. You may want to increase your cover if you have children or increase your mortgage. But similarly, you may want to reduce your cover if your children have grown up or you’ve paid down your debts. Review your policy regularly to make sure your cover satisfies your current needs.

MYTH # 6 – THE COVER IN MY SUPER IS ENOUGH

Over 70% of Australian life insurance policies – more than 13.5 million separate policies – are held through superannuation funds. While this cover is great to have, many of these policies only provide the minimum level of cover employers have to offer, which isn’t enough for most people. In fact, Rice Warner estimates that the median level of cover in superannuation meets is only 60% of needs for life cover (or just 38% for families with children), 13% for TPD cover and 17% for income protection.

MYTH # 7 – I’LL BE COVERED BY WORKERS’ COMPENSATION

Workers’ compensation provides some protection for work-related accidents or injuries. But it doesn’t cover most illnesses, nor does it cover anything that happens to you when you’re not at work. It’s worth checking your states workers compensation legislation.
Even if you are covered by workers compensation, the benefits are typically capped in terms of the amount and duration of payments, which means the cover could fall well short of what you really need.

MYTH # 8 – ONLY THE MAIN BREADWINNER NEEDS LIFE INSURANCE

There’s no doubt that insuring the breadwinner is vital for any family’s financial security. But if a non-working or lower income-earning partner became seriously ill or injured, their family would need a lot of assistance to replace their services within the home.
Imagine a breadwinner had to reduce their working hours to look after their partner or young children or employ outside help. Either option could prove very expensive, which is why both members of a couple should consider the various life insurance cover options available – regardless of their role.

 

WANT TO KNOW MORE?

If you would like to discuss the contents of this article, please call us at 02 8015 5507 or email us at info@angelicinsurance.com.au Please note that at Angelic Insurance, we can only provide you with general information, and do not consider your personal objectives and financial situation. You should consider whether the advice is suitable for you before making the final decision.