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Eight Life Insurance Myths Busted


Before examining the nine myths around life insurance, consider one key truth: fully underwritten life insurance can bring an added degree of financial security and peace of mind into your life.

Fewer medical questions means quicker and better cover

Some life insurance covers don’t ask many health questions when you apply. Often these have broader pre-existing condition clauses may increase the likelihood of your claim being delayed or declined. If you already have life insurance or are thinking about taking out cover, do your homework: always read the Product Disclosure Statement (PDS) and other documents from your insurer to make sure you know what you are, and are not, covered for. It can be easy to buy cover because it’s quick and/or cheap, but this doesn’t mean it’s the best life insurance for your particular circumstances.

I’m single, so I don’t need life insurance

Even if you don’t have any financial dependants, there may still be debts to pay and funeral expenses to cover. If you don’t have many debts, nor a partner or children to think about, then your life insurance may cost you less than you think because you may decide that you do not need a high level of cover.

My super fund’s default life insurance is enough

The life insurance provided within many superannuation funds may not adequately cover your life insurance needs. Default cover does not consider your personal circumstances including dependants and debt and income levels. If your super fund provides life insurance cover, you consider whether the sum insured is adequate keeping in mind your levels of debt and how much you want to provide for loved ones should you pass away.

Fully underwritten and Partially Underwritten covers are the same

Fully underwritten cover is more fully assessed before the policy is issued, whereas partially underwritten cover often involves a more detailed assessment is made at the time of claim when your family may be going through a difficult time. With fully underwritten cover, the insurer asks a number of health, occupation and lifestyle questions upfront and sometimes requires medical tests and details of your medical records. This process does take longer than partially underwritten cover, but results in far greater certainty about the risks the insurer is taking to provide cover, and importantly greater certainty for you at claim time.

Only breadwinners need life insurance

Many families make the mistake of not thinking about their primary caregiver taking out cover. Stay at home parents provide an important role that, while unpaid, may need to be replaced ‘in kind’. The cost of childcare, cleaning, housekeeping and home maintenance duties can be considerable. Bear in mind too, that the family’s main earner may have to reduce their hours of work in order to help care for the children.

I won’t need life insurance until I am older

Life insurance premiums are calculated based on a number of factors including your age and health, which is assessed before your cover commences, so it makes good sense to think about applying while you are young and healthy.

My health disqualifies me from life insurance

A medical diagnosis does not automatically mean you will no longer be eligible to obtain life insurance. You need to disclose your health conditions during the application process, but this doesn’t necessarily mean that cover won’t be provided. Sometimes, alternate terms for the policy may be offered. These can include exclusions relating to a specific condition or increased premiums due to increased risk of condition. Bear in mind that there are some medical conditions where given insurance providers won’t offer any Life Cover, but these are limited.

I can file away my life insurance policy and forget about it

It is important that you keep your life insurance policy up to date and consider whether you should adjust your cover levels with significant life events. Major life events such as marriage, birth of a new baby, change to income or changing your debt levels – should prompt you to consider adjusting the benefits on your policy. This will help prevent you from becoming underinsured as your life circumstances change.
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