Insurance is an integeral piece of a financial plan. Here are some of the most common misconceptions of personal insurances.
Misconception 1 – Life insurance companies don’t pay claims
There’s a common perception that life insurance companies will do everything they can to avoid paying claims.
In fact, 92% of all life insurance claims are paid in the first instance¹.
As long as you fulfill your duty of disclosure 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.
Misconception 2 – I’m young and don’t have kids or a mortgage, so I don’t need it
Life insurance isn’t all about providing for debts and dependants. It’s also about looking after yourself.
Think what would happen if you became ill or disabled and couldn’t work. If you didn’t have income protection, you’d have to find another way to supplement your income – through friends or family. Having income protection means that you are more likely to be able to manage on your own.
There are benefits to applying for life insurance when you’re young and healthy. It’s generally cheaper and it means you don’t have to worry about getting cover later if your health changes (see #3).
Misconception 3. I won’t be covered if my health changes
Once you start your cover, what you are covered under your life insurance for won’t change – even if your health declines.
In fact, you generally don’t even need to tell your insurer about a change in your health unless you intend to make a claim.
Misconception 4: I’ll be stuck paying for cover I don’t need
Life insurance is designed to change as your life changes. Your cover needs can vary significantly over your lifetime.
Personal insurance is not static as people think. As we have written about in past articles, constant review is needed throughout your life. This is to make sure your policies are covering you in the most efficient manner.
An example may be when taking out life insurance when getting married. You may want to increase your cover if you have children or increase your mortgage. But similarly you may want to reduce your cover if your children have grown up or you’ve paid down your debts.
Your financial adviser can help you work out how much cover you need at any given time, to make sure you’re not paying for any cover you don’t need.
Want to know more?
If any of these misconceptions ring true with your understanding of insurance, maybe it is time to talk to a financial adviser. At Discovery Wealth we can assist you in putting together an insurance portfolio to protect you and your family. Contact us now for an Obligation Free Discovery Meeting.
Authorised Representative of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429. The information provided in this document, including any tax information, is general information only. It does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser.