1. Insurance is only for families
The myth: People don’t need life insurance if they’re young and child-free, and don’t have a mortgage.
The reality: Life insurance isn’t just about paying off debts and helping dependants. It’s also a way to look after yourself if something were to happen.
It’s something worth thinking about: if you became ill or disabled and couldn’t work, who could you ask to help cover your day to day expenses, or pay the costs of adapting to a life of disability?
With the right insurance, you can continue to manage the bills on your own, and keep your independence.
Income protection cover helps you out with a regular benefit payment when you can’t work, covering up to 70% of your before-tax income (excluding super contributions). Or you might consider total and permanent disablement (TPD) insurance, which gives you a lump sum payment if you become totally and permanently disabled. There’s also trauma cover, which protects you from the financial impact of severe conditions such as cancer, heart attacks and stroke with a one-off payment.
There are also some real benefits to applying for life insurance when you’re young and healthy. The cost is typically lower when you’re younger and it means you don’t have to worry about being ineligible forcover later if your health changes (see myth #6).
2. My super fund has me covered
The myth: You have enough cover through your super and don’t need anything extra.
The reality: While cover through super is great to have, many policies only provide the minimum level of cover employers have to offer. Unfortunately, this isn’t enough for most people.
Research by independent actuaries Rice Warner shows that the average default insurance from super funds meets only 65%–70% of average household needs – and for families with children, it’s even lower.[1] That’s why it’s a good idea to check what cover your super fund offers and talk to a financial adviser about the level of protection you need, now and in the future.
3. It’ll be hard to get paid if I make a claim
The myth: Insurance companies make it hard to make a claim and many people don’t end up receiving a payment when they make a claim.
The reality: Based on current data, 91.5% of all life cover claims are paid in the first instance by the insurance industry. And if you go through a financial adviser, that figure is even higher at 96.6%.[2]
As long as you fulfil your duty to take reasonable care not to make a misrepresentation when you apply for cover, and you’re covered for the medical condition you’re claiming for, you can be confident your claim will be paid.
4. I’ll be paying for unecessary cover
The myth: You’ll be stuck paying for cover you don’t actually need.
The reality: Nothing is static, people’s situations change – and life insurance is designed to change with you and your circumstances.
The right life insurance cover is flexible, so you can change your level of cover as your life changes. For example, you may consider increasing your cover if you have children or your mortgage increases. Similarly, you may want to reduce your cover if your children have left home or you’ve fully paid off your home loan.
A financial adviser can help you work out how much cover you need at any given time depending on your individual situation. This ensures you’re not paying for any cover you don’t need.
5. There are lots of medical tests involved
The myth: You’ll need to have lots of medical test for a life insurance provider to approve you for cover.
The reality: Most life insurance products sold through a financial adviser don’t require medical tests before approval, but even when they do, it’s often as quick and simple as a single blood test and a GP examination. The purpose of these tests is to ensure your cover accurately reflects your health and medical history.
If you have an existing medical condition, you might be asked to provide extra information. You generally won’t be covered for serious or significant pre-existing conditions, so it’s important to establish upfront what those conditions are, so you know exactly what is included in your policy.
6. My cover won’t adapt with my changing situation
The myth: You won’t be covered if your health changes or deteriorates.
The reality: What you’re covered for at the start of your insurance policy won’t change – even if your health worsens.
In fact, you don’t even need to tell your insurer about a change in your health unless you intend to make a claim.
7. I’m already covered by workers’ compensation
The myth: Workers’ compensation provides enough cover if you have a work-related accident or injury.
The reality: Workers’ compensation provides some protection for work-related accidents or injuries
However, even if you are covered by workers’ compensation, the benefits are typically capped. This means the cover amount and duration of payments could fall short of what you really need.