5 Deadly Mistakes With Life Insurance
With the removal of 'whole life' insurance policies from the Australian market some time ago, life insurance has been simpler than ever. The remaining option, term life insurance, works in exactly the same way as any other insurance product. You pay a premium, the insurance company gives you a list of covered events and if one of them happens, you can claim the listed amount. This also applies to trauma insurance and TPD insurance (total and permanent disability insurance). However, new research has shown a startling lack of understanding with regards to life insurance policies by Australians. Today we reveal 5 common and deadly misconceptions about life insurance.
1. Believing that you have 'social life insurance' available
Australia is very lucky to have socialized healthcare and a good system to support those that are unemployed and disabled. However, many Australians believe the Federal Government is required to financially assist families in the event of one member's premature death.
If you do not have Life Insurance cover and you become unemployed due to grief from the death of a family member you may be entitled to unemployment benefits (currently around $450 per fortnight at full rates)
2. Thinking that life insurance offers a lump sum payout if you live past retirement age.
This dangerous assumption that your Term life insurance will pay you a lump sum in retirement could lead to people failing to put enough money into their super, choosing an incorrect premium structure for their life insurance, or managing assets and debt poorly.
3. Not trusting life insurance companies to pay out
Life insurance claim disputes are often high profile affairs. The claims that are paid quickly and in full are less newsworthy ... and so many people believe that life insurance companies will try to use loopholes to get out of paying a claim. In fact, life insurance companies are required by law to pay out as long as you have met your obligations, and billions of dollars are paid out by them every year.
4. Overestimating the cost of life insurance
Life insurance is not a large expense, year by year. Policies available through superannuation are especially cheap, and even private cover costs less than car insurance for most people. Don't assume you cant afford it ... the risk to your finances isn't worth it.
5. Thinking that Worker's Compensation covers incidents that occur at home
Many Australians believe that the government is required to pay a replacement income to people that suffer an injury or illness ... even if it isnt incurred at work. Unfortunately, Worker's Compensation only protects you from work place induced injuries and illnesses, You would be able to apply for unemployment benefits (about $450 per fortnight) if you were eligible upon the loss employment.
There is plenty of free advice available on your life insurance options - if you've never considered getting insurance, it is well worth talking to an expert. You owe it to yourself to make an informed decision, rather than an assumption.
by: Hilary Briss