7 Life Insurance Myths That Need To Be Debunked
1. Only the family breadwinner needs Life insurance coverage
It’s very easy to assume this view, however the financial costs associated with all Home Duties based partners are far higher than you think. The costs of day care, child minding services for out of school hours, home cleaning, meal preparation and even transporting the children to school and sports events can be considerable when calculated on an annual basis. Many families make the mistake of only insuring the key income earner when the Home Duties based partner should also be a high priority.
2. My claim won’t be paid
Australian Life insurance companies pay all genuine claims as quickly as possible. The Risk Store (an information site for financial services professionals) revealed that Life insurance payments in Australia, for all forms of financial protection, were in excess of $5 billion over a 12 month period (published in June 2014). In 2011, Life insurance companies in Australia paid an average of $80 million in Death and Disability claims every week, so this confirms the focus of our Australian Life insurance industry on supporting their clients when they need it most.
3. Life insurance is too confusing
Life insurance involving Death only cover is very simple – if you were to die, the insurer will pay the sum insured under the policy on satisfactory proof of death. To ensure there are no delays with payment, all the questions within the Application Form need to have been answered accurately. Life insurance contracts generally incorporate only one standard exclusion (i.e., suicide in the first 13 months of the policy commencing). Other exclusions may be applied specifically to some clients depending on their individual health and pastimes circumstances at the time of the assessment of their Application.
4. I’m better off investing my money than buying Life insurance
Until you are in the enviable position where all your liabilities are paid and your family can maintain a comfortable lifestyle if you were no longer around, you should have Life insurance in place to protect your family. The very best financial planning includes investment in growing assets, such as cash, property and shares, balanced with protection against significant and unforeseen losses, as provided by Life insurance.
5. I’m single and don’t have dependents, so I don’t need Life insurance
Even without dependents, you may still want to allow for enough Life insurance to cover the costs of any personal debts and medical and funeral bills, to ensure that you don’t leave a legacy of unpaid expenses for your family.
Remember that Life insurance isn’t just about payment on death. Young people often have exciting lifestyles with ongoing costs which need to be supported during sickness or injury. Also certain unexpected medical traumas, such as cancer or heart attack, can affect people of all ages, so Life insurance is important for all independent Australians.
6. The Life insurance company probably won’t even be around at claim time
Life insurance companies in Australia are all regulated by APRA (the Australian Prudential Regulatory Authority) and are subject to stringent capital and reserving requirements which protect the policies of all their clients. This ensures that all Life insurance companies remain viable and are able to meet all future claim obligations, even if they merge or get taken over by another insurer.
Many Life insurers, such as NobleOak, also reinsure their products with huge global reinsurers for extra financial security.
7. Lower premiums probably means poor quality
This is a major myth and is very misleading.
There are many factors which contribute to the pricing of Life insurance products. These include the costs associated with the distribution, Adviser involvement, the number and depth of questions asked in the application and also the marketing of the products. These expenses are built into the premiums which clients pay for their Life insurance cover.
As a general rule, if there are less questions asked of the Life insurance applicant upfront during the application process, the more expensive the premiums will be. This is because the less questions the Life Insurer asks the less they know about the client, and therefore assumptions have to be made about the potential extra risk of those clients. This means higher premiums could be charged due to this information gap.
At NobleOak, we provide lower premiums than comparable competitor products as we don’t spend money on mass advertising, we don’t pay high upfront commissions to Advisers, and we assess each Application accurately by asking all the right questions up front. We pass these savings onto our clients and we provide quality Life insurance products at the best value for money.
NobleOak offers our comprehensive cover directly to the customer, through Premium Life Direct. You can obtain a quote here.
If you are unsure about the Life insurance cover which would be best for you, please speak with a quality financial adviser or visit the NobleOak website for more information.