Life Insurance Myths

Life Insurance is an easy and practical way to take care of your family, no matter what happens. If you were to die or become terminally ill, your life insurance would pay them a lump sum, keeping them safe even when you’re no longer around.

So if you have a family to take care of, life insurance is something worth considering, especially if you have a home loan and other debts to cover. Yet many Australians still think life insurance doesn’t matter — perhaps because of these life insurance myths.

MYTH 1 — IT WON'T HAPPEN TO ME.


Of course, we all hope no-one in our family dies or becomes fatally ill, but it’s important to be prepared, just in case. Let’s look at a few important facts.

• Every day in 2008, 18 Australian families lost a working age parent. 
• Every year, more than 235,000 working age parents get seriously ill or injured. Over 17,000 people have to stop working — some for an extended period, others permanently. 
• Over one million working-age parents with kids and other dependants are affected every year by death, a serious accident or illness.*

All these events are stressful enough on their own, without the added financial pressure of losing an income. So it’s comforting to know you can avoid this situation by making sure you have the right level of life insurance.

*Source:  Understanding the Social and Economic Cost of Underinsurance, The Lifewise / NATSEM Underinsurance Report, National Centre for Social and Economic Modelling, University of Canberra, February 2010.

MYTH 2 — LIFE INSURANCE COSTS TOO MUCH



Actually, it can cost a lot less than you might think — starting from less than the cost of a cup of coffee a day. We’re sure you’d agree your family’s financial security is worth at least that.

Here are some examples of what you might pay each week for $250,000 worth of cover:

InsuranceLine Life Insurance Plan — weekly premium

Current Age
Male 
Non-Smoker
Female 
Non-Smoker
35
$6.93
$5.78
40
$8.08
$6.35
45
$10.96
$9.23
50
$17.31
$13.85

MYTH 3 — I HAVE LIFE COVER IN MY SUPER FUND


Many people rely on the super cover provided by their super fund. But unfortunately that cover may not be enough. Depending on your situation, it might also lead to some unexpected results.

For example, you might find that your super funds’ life insurance:

• Gives you less cover than you need, leaving your family exposed. Always check your super fund’s default cover levels to  make sure it gives your dependants enough financial protection.
• Eats into your super savings;
• Results in a few unpleasant tax surprises for your beneficiaries. Life insurance benefits under superannuation often have more rules limiting who can or can't receive a tax-free payout. For instance, if your children are over 18, they'll be classed as non-dependants, which means their payout may be taxed.
• Takes a long time to get paid out. That's because benefits usually go to the fund first, which then needs to work out who the life insurance needs to be paid out to, and how much they receive.

MYTH 4 — THE GOVERNMENT WILL LOOK AFTER US


Don't count on it. If you die, get injured or are unable to work, social security benefits won’t be nearly enough to maintain your family’s standard of living. According to the Centrelink website, a bereavement payment is usually only paid to people already getting an eligible payment from Centrelink or the Department of Veterans' Affairs. Even in this case, the lump sum you'd receive wouldn't be much — for a member of a couple, for instance, you'd get what you would have received with your partner for up to 14 weeks, less your single rate.

MYTH 5 — IT'S ALL TOO HARD TO ORGANISE


Today, there are more ways to buy life insurance than ever before. If you buy it directly from a life insurance company or a distributor like InsuranceLine, you can arrange cover over the phone or online in minutes, with no messy forms and no intrusive medical tests.

MYTH 6 — INSURANCE COMPANIES DON’T PAY


Yes, they do. According to a survey by the Financial Services Council (FSC), more than $2.3 billion in claims were paid in the 2008 calendar year on nearly 35,000 policies.

A life insurer is legally obliged to act in 'utmost good faith'. In other words, the insurance company must:

• Assess claims quickly;
• Not delay paying claims without a good reason; and
• Not refuse to pay claims without a good reason (such as a false claim).

When you apply for life insurance, make sure you give your insurer all the information they ask for, and to answer all of their questions honestly and completely. If there's a claim, they’ll need to check your medical records — and if it turns out you didn't reveal something important, they may have to refuse the claim.

That's not something they want to do, especially when your family is under stress, so it’s best to be open with them from the start. By being honest and thorough at the beginning, you can be confident your promise to protect your family’s financial future is secure — even if you’re not around any more.

IS YOUR FAMILY PROTECTED?


Don't let myths like these get in the way of keeping your family safe.  Call InsuranceLine on 13 77 87 to find out how you can protect your family today.