Life insurance is one of those subjects most Australians prefer not talking about, often moving the conversation onto something more cheery like sport, family and what they plan on doing at the weekend. If it is given thought, a lot of people might simply take out the first policy offered to them, without thinking about the fine print or whether it is suitable for their needs.
Here are six things to remember about life insurance and the process of insurance comparison; these tips are worth bearing in mind when shopping for a new policy.
1. Life insurance isn’t just for families
A lot of young Australians wrongly assume that life insurance is something needed if you have a family to take care of. If you are a young professional and want to leave property, for instance, to a friend or relatives, a life insurance policy is a way to pay off debts on your death, saving assets that might otherwise have needed to be sold. If you look after an elderly relative, life insurance may be essential to help them afford care after your death. Business owners should also think about taking out life insurance to cover business debts.
2. It isn’t paid out immediately
Life insurance policies, unlike what you might think, are not paid out immediately after a spouse or relative dies. The insurer must confirm the death and make the necessary arrangements with the beneficiaries of the policy. Insurers vary in how this is managed, so you will need to check the terms and conditions of the policy to find out how long it will take. Look out for any clauses which may delay payment, and what information the insurer needs in order to process a claim. There might also be special situations where payment may be made faster, but this is the exception than the norm.
3. Life insurance might not pay for everything
Another thing to remember about life insurance is that the amount your family receives on your death might not completely cover every expense they will have to meet, so look at what coverage is available and to what limits. You can use an online calculator to work out the cover amount you might need; be accurate as possible when entering mortgage, personal debt and other required figures.
4. Rates are not fixed
Always remember that life insurance rates are not fixed. Rates may go up at your next life insurance renewal. Global economic turmoil, poor stock market returns and other factors can affect the insurer, who may need to make up the losses by increasing premium rates. It’s unavoidable, so bear this in mind.
5. Expiry dates and cancellation policies
Your life insurance policy will expire on a predetermined date if it is not renewed. If you choose to cancel before that date, you might not get any reimbursement on the premium. Always check the terms and conditions before signing the policy, and ask for more information if you are unsure.
6. Look at the exclusions
Love skydiving, hang gliding or motor racing? Life insurance companies may exclude claims arising from participating in these types of sports.
If you suffer from a medical condition, you might have to pay an additional loading – a fee to compensate for the additional risk. This might be as much as 50% of the monthly premium.
Workers with high-risk jobs such as working on oil rigs might also have to spend more time on their life insurance comparison to find suitable cover. You may also find that you’re able to use your employer’s corporate life insurance plan.
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