7 big life insurance myths busted
There are some common misconceptions that can stop people from getting the life insurance cover they need. Here, we expose some of the biggest life insurance myths. The following is not personal financial advice, but it does contain useful information for you to consider.
Myth 1: Less medical questions mean quicker & better cover
Most directly available life insurance covers don’t include health questions when you apply. Often these have a higher number of broader pre-existing condition clauses that may result in your claim being delayed or even declined. If you already have life insurance or are thinking about taking out cover you should 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 circumstances.
Myth 2: I’m single, so I don’t need life insurance
Even if you don’t have any dependants or a partner, there may still be debts to pay and funeral expenses to cover if you were to pass away. For example, the average basic cremation in Australia costs upwards of $4,000, with burials costing even more. If you don’t have many debts, nor a partner or children to consider, then life insurance may cost you less than you think as you a high level of cover may not be needed for your personal circumstances.
Myth 3: My superannuation fund’s life insurance is enough
The life insurance provided within many superannuation funds may not adequately cover your life insurance needs. Research shows that super’s median default cover meets only about half of the basic needs for households with no children¹. The proportion is lower for families with children, falling to less than 25% for families with just one child.
Myth 4: Life insurance is expensive
The cost of life insurance might surprise you as it may be less expensive 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 a $1 day for comprehensive cover². It could be money well spent as life insurance could help to safeguard your family if you were to pass away.
Myth 5: Fully underwritten & partially underwritten covers are the same
Fully underwritten = greater certainty. One of the key points of confusion can centre around the difference between “underwritten” cover, which is assessed upfront, versus products that are not fully underwritten (“partially underwritten”), where the 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 several health, occupation and lifestyle questions upfront and sometimes requires medical tests and details of your medical records. This process takes longer than cover that is not fully underwritten but results in greater certainty about the risks the insurer is taking to provide cover. This helps to provide greater certainty during claim time.
Myth 6: 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 will not be provided. In some instances, cover will be provided with an exclusion relating to your specific condition. Premiums may be slightly higher to reflect your increased risk levels, but if you are taking positive steps to manage your condition, you can keep any additional premiums to a minimum. Bear in mind that there are some medical conditions where NobleOak won’t be able to offer death cover, but these are limited.
Myth 7: I can file 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. Also, with NobleOak’s life cover, certain major life events such as marriage, birth of a new baby, increasing your mortgage or adopting a child you can apply to increase your death cover without any further medical underwriting (subject to limitations). This facility can help act as a buffer against being underinsured as your life circumstances change.