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Think you know life insurance? Think again.

Date: Nov 04th, 2016

Whatever your goals in life, everyone wants to ensure their loved ones are looked after should the worst happen.

Most people think they understand life insurance – you pay the premiums and your insurer pays out a lump sum in the event of your death. But it’s a subject that’s commonly misunderstood.

Here are five facts about life insurance that might surprise you:

You could get life insurance even if you have a pre-existing medical condition.

There is a myth that having a pre-existing medical condition automatically excludes you from buying life insurance altogether.

This is not true. You can take out life insurance, however your pre-existing condition may be excluded, or you may be required to pay a higher premium for your insurance cover. Different companies define pre-existing medical conditions in different ways, so it’s important to read any disclosures thoroughly and shop around if necessary, and remember that you have a legal obligation to disclose any pre-existing conditions to your insurer – otherwise you run the risk of your claim not being paid.

The life insurance cover that comes with your superannuation may not be adequate.

Did you know that more than 70% of Australian life insurance policies are held inside super1? This can be a tax-effective way to pay for life insurance as the cover can be paid for out of your pre-tax contributions rather than your take-home pay.

But the life cover bought by super funds is often based on averages and may not be tailored to your individual circumstances. Statistics also show that 95% of Australians have inadequate life cover2, so it’s important to review the life insurance provided through your super fund to ensure it’s sufficient.

If not, you could consider buying additional cover – either inside or outside your super fund.

Life insurance can be tailored to suit your needs.

Just as with other types of insurance, life insurance is not one-size-fits-all. You can adjust your cover to reflect your changing circumstances – such as having children, buying a home or retirement – to ensure your cover remains suitable to your needs.

Doing this will also mean that you are never paying more in premiums than you need to.

You can alter your life insurance premiums.

Some people think that insurance premiums only go one way: up. But there are a number of ways to alter your premiums should you need to.

Firstly, your policy may have a feature that automatically increases your cover each year to keep up with the rising costs of living. This means, however, that you may pay higher premiums for the increased cover. If you don’t need this additional cover you can cancel your next automatic increase and your cover remains the same.

Your policy may also allow you to fix your premiums at their current level. If you choose this option you will retain your cover, but the amount of cover you have will decrease each year on your policy anniversary.

And if you make positive lifestyle changes that improve your health, you can request an insurance reassessment to see if you can decrease the cost of your cover.

You can also control your premiums by opting for longer waiting and benefit periods.

Renewals are guaranteed even if your circumstances change.

Once you’ve taken out life cover, it will automatically renew each year regardless of changes to your health until you either choose to cancel it or reach the maximum age under your policy.

But if you let your insurance lapse you will no longer be covered, and you may not be able to get the same level of cover again in the future, so a good strategy is to take out cover when you are young and healthy – and retain it.

If you woukld like to discuss or find out more, please call on |PHONE|.

Source: AMP November 4th, 2016


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