Before we talk about the top 9 life insurance myths, let’s look at one of the key truths. Fully underwritten life insurance can provide an added degree of financial security and peace of mind into your life.
There are common misconceptions or beliefs that most people do not consider to get the cover they need. In this article, we expose some of the top life insurance myths if they are true or not. Please note that the following is not personal financial advice… yet it does contain useful information that many people should consider!
Myth 1: Less medical questions means quicker and better cover
A lot of directly available life insurance plans don’t ask many health questions when you apply and often these insurers have a higher number of and/or broader pre-existing condition clauses that may result in a higher chance of your claim being delayed or worst, may even decline. If you already have life insurance or you are thinking about getting covered, you need to do your homework.
Remember to always read the Product Disclosure Statement (PDS) and other documents from your insurer to make sure you know what you are, and are not, what are you insured for. It can be easy to buy an insurance plan because it’s fast and/or cheap, however, this doesn’t mean it’s the best Life Insurance for your particular circumstances.
Myth 2: I’m single, so I don’t need life insurance
Fact: Whether you’re single and even if you don’t have any dependents or a partner, there may still be debts to pay and funeral expenses to cover if you were to pass away. For instance, the average basic cremation in Australia costs upwards of AU$4,000, with burials costing much more. If you don’t have many debts, nor a partner or kids to think about, then your Life Insurance may cost you less than you think because you may customise and decide that you do not need a high level of cover.
Myth 3: My superannuation fund’s life insurance is enough
Fact: The Life Insurance provided within most of the superannuation funds may not sufficiently include your Life Insurance needs. Research shows that superannuation funds’ median default cover meets only about half of the basic needs for households with no kids. Moreover, the proportion is lower for families with children – falling to less than 25% for families with just one kid.
Myth 4: Life insurance is expensive
Fact: You might be surprised with the cost of Life Insurance– it may be cheaper than you think. Policies vary, and premiums will depend on your age, health and lifestyle. A non-smoker in their 30s can expect to pay less than AU$1 a day for comprehensive cover. Life Insurance could help you to safeguard your family if you were to pass away and can be a money well spent.
Myth 5: Fully-underwritten and partially underwritten covers are the same
Fully underwritten = greater certainty. One of the main confusions can centre around the difference between “underwritten” plan, which is assessed upfront, in contrast to the products that are not fully underwritten (“partially underwritten”), where the assessment is created at the time of claim when your family may be going through a difficult time.
With fully underwritten cover, the insurance company asks questions about a number of health conditions, occupation and lifestyle upfront and sometimes needs medical tests and information of your medical records. This process does take longer than cover that is not fully underwritten, however results in far greater certainty about the risks the insurance company is taking to provide cover, and more importantly greater certainty for you at claim in time.
Myth 6: Only breadwinners need life insurance
Fact: While it is important for the family’s main breadwinner to carefully consider removing life insurance, many families make the mistake of not thinking about removing the policy for their primary breadwinner. Stay-at-home parents provide an important role to that, while unpaid, may need to be replaced ‘in kind’. The expense for childcare, cleaning, housekeeping, and home maintenance duties can be considerable. Bear in mind, too, that the family’s main provider of income may have to reduce their hours of work in order to help care for the kids.
Myth 7: I won’t need life insurance until I am older
Fact: Most people make the mistake of delaying of not removing other cover until they are older. However, life insurance premiums are computed based on a number of factors including your age and health, which is assessed prior to your cover commences, therefore it makes good sense to avail while you are young and healthy. Did you know that many claims are made by people aged in their 40s?
Myth 8: My health disqualifies me from life insurance
Fact: Having a medical diagnosis does not always mean you will no longer be eligible to avail of life insurance. It is important to disclose your health conditions during the application process, however, this does not automatically mean that cover will not be granted. In some cases, the policy will be provided with an exclusion relating to your specific condition.
Premiums may slightly be more expensive to reflect your increased risk levels, yet if you are taking positive steps to manage your health diagnosis, you can keep any additional premiums to a minimum. Keep in mind that there are some medical conditions where NobleOak will not be able to offer funeral cover, however, these are limited.
Myth 9: I can file my life insurance policy and forget about it
Fact: Keep in mind that it is important that your life insurance policy is updated, and you should think about whether you need to adjust your cover levels with significant life events.
In addition, with certain major life events such as marriage, the birth of a new baby, increasing your mortgage, or adopting a child – with NobleOak’s life cover, you can apply to add your death cover without any further medical underwriting (subject to limitations). As your life circumstances change, this facility can help act as a buffer towards being underinsured.
We thought this was a useful article written by Noble Oak and we wanted to share it with you as a valued client. We are in no way providing advice or suggesting you use or contact Noble Oak. If you do want to review your insurances, we have trustworthy Financial Planners who can assist you with the selection of the most suitable products.
If you have any question or enquiries regarding life insurance, please contact us here.