If ever there was an area that needs to be understood by Australians it is the value and details of personal insurance coverage.
Research in this subject has shown that most Australians are under-insured in insurance covering life, total and permanent disability (TPD) , trauma and income protection which means they’re extremely vulnerable to the possibility of a disaster striking them.
The median level of life insurance cover across the working age population is only 42% of what they need to maintain their family’s standard of living. Median levels of TPD and income protection cover are even lower, at 14% and 16 % respectively.
‘It won’t happen to me’ approach can be one of the worst things you ever do.
It’s worth noting that insurance industry statistics tell us that on an average day in Australia:
- 214 people are diagnosed with some form of cancer
- 41 people undergo coronary artery by pass surgery
- 35 people between the age of 35 and 69 will undergo but survive a heart attack.
Furthermore, 25% of the working population will incur an injury of some form to be disabled for more than one month in their working life.
The key thing that needs to be appreciated is that all insurance is not the same and unfortunately the cheaper, off-the-shelf products are generally of considerably less value.
With respect to life insurance you need to be aware of significant differences in the packages offered.
Essentially, it’s sold through three main channels:
- Your superannuation fund
- Financial advisers
- Direct from the insurance company.
Direct life insurance, generally marketed via daytime TV and radio advertisements, direct mail or over the phone offers pared-down (‘lite’) products sold without financial advice, and often with little or no underwriting.
Sounding good in theory, they offer simplicity without medical and blood tests but the sum insured is generally capped, compared with no maximum for advisor authorised products.
Furthermore, when no questions are asked, the premiums are often higher and there are usually more exclusions such as accident-only cover for the first few years or no terminal illness benefit to avoid people who take out life insurance when they suspect they have become seriously ill.
By contrast, underwritten form of insurance involving medicals – at the insurer’s expense, helps insurers evaluate the risk of insuring you, so if you’re low risk, healthy and in a low risk occupation you’ll be rewarded with lower premiums.
The key to buying life insurance is to ascertain exactly what you’re covered for, how much the insurer will pay out and how much you will pay for the benefit.
The safest route is to take personal insurance when you’re young and healthy. It’s ‘guaranteed renewable,’ meaning any changes in health occurring after it is taken out won’t result in denial of cover, premium increases, or exclusions.
If you would like to have your coverage examined by one of our experts please feel welcome to speak with one of our advisors.