INTHEBLACK October 2021 - Magazine - Page 43
ARE YOU
MAKING THESE
SIX MISTAKES
WITH YOUR LIFE
INSURANCE?
FROM OVERLOOKING POLICY
EXCLUSIONS TO POOR
PLANNING, THERE ARE A
NUMBER OF COMMON ERRORS
PEOPLE MIGHT MAKE WHEN
CHOOSING LIFE INSURANCE,
POTENTIALLY LEAVING THEM
WITH INADEQUATE COVER.
HERE’S HOW TO AVOID THEM.
T
HE PROCESS OF CONSIDERING LIFE
insurance can be daunting and
incredibly complex. With an assortment
of premium structures, waiting periods,
exclusions, cover types and values to
navigate, it can be difficult to pinpoint the
best option for you and your family.
Unsurprisingly, many people don’t get
their life insurance right, which can be costly
in a variety of ways. Here, we explore six of
the most common mistakes and how to
avoid them.
Not comparing the market.
There are currently 38 life insurance
companies and friendly societies regulated
by the Australian Prudential Regulation
Authority (APRA) and each offers a range
of different products. Rather than going
with the first one you find, it’s worth
comparing a selection – either with online
comparison tools or directly through
insurers – to find the most appropriate
fit for your circumstances. If you already
have a life insurance policy through your
superannuation fund, or another issuer, take
the time to check how it measures up
against other products.
01
Failing to plan. Life insurance is about
so much more than just death (or life)
cover; it also encompasses total and
permanent disability (TPD) insurance,
02
trauma insurance and income protection
insurance, not all of which are automatically
included in a policy.
According to a 2020 report from Rice
Warner, the current level of insurance held
by Australians covers 92 per cent of basic
death needs, but only 29 per cent of TPD
needs, which means many of us may be
underinsured.
It is important to assess how much cover
will be required to recompense all the
potential costs that could accompany death,
injury or illness – whether that means helping
pay the mortgage or addressing other
financial commitments. Online tools, such
as the Australian Securities and Investment
Commission’s MoneySmart life insurance
calculator, are a good place to work out how
much you may need for any eventuality.
Skimming the fine print. The policy’s
product disclosure statement is
essential reading – helping you understand
what it covers and excludes, whether any
waiting periods apply, and how your premium
payments work.
Certain illnesses, for example, may not be
covered; likewise, if you indulge in hobbies an
insurer considers “risky”, such as motorsports
or paragliding, additional exclusions might
come into play.
It is better to know at the outset, rather
than at the point of lodging a claim, to
03
mitigate unwelcome surprises. If you don’t
understand, make sure you ask questions.
Providing false information. It might
seem obvious, but you need to be
honest with your insurer regarding your
health and lifestyle.
If, for example, you fail to disclose an
existing medical condition or fail to mention
you are a smoker, you not only provided
incorrect information, but also put yourself –
and any beneficiaries – at risk of being denied
a payout if a claim were to arise.
04
Overlooking beneficiaries. Just as you
should adapt your life insurance policy
to suit changing life stages, you should also
review it regularly to ensure it reflects your
current family situation.
When significant events occur, such as
marriage or divorce, death of a spouse or
birth of a child, people often forget to update
their beneficiary list, which can create issues
when a claim is paid out.
05
Leaving it too late. There’s no “right”
age to get life insurance, although
major milestones like buying a house or
having children are common catalysts.
Generally, the younger (and healthier) you
are, the more straightforward the process
– and lower your premiums – may be.
06
Click here for a life insurance quote from NobleOak, or call 1300 108 490 and mention “CPA”
intheblack.com August 2021 43