Common Life Insurance Myths
There are a number of life insurance myths that we hear when talking to our clients. Myths that in some cases have prevented people obtaining life insurance that may one day provide the only available financial benefit to a family who has lost a loved one. Here are the top 5 life insurance myths that we come across.
1) Life Insurance companies do not pay claims! This is probably the biggest life insurance myth and is not based on any evidence! Life insurance companies pay in excess of 97% of all life insurance claims made in Australia with most insurers paying out over $1 million in benefits every day! What about the other 3%? Most of the claims not paid were due to major non-disclosure of medical history in the application. To ensure that your life insurance claim gets paid, ensure that you disclose your medical history properly!
2) If I’ve ever had an illness I cannot get cover! It is true that life insurance companies underwrite medical (and in some cases occupational) history. This is not to find a reason to decline people cover, rather to get the information required to offer cover! The life insurance industry has moved leaps and bounds in the last decade and pre-existing illnesses that once made a person unable to obtain cover, are now not considered as serious by an insurer. In saying this however, insurance companies need to maintain a sustainable business and if there are more severe ongoing medical conditions an insurer can either offer insurance with an increased premium or with an exclusion. Some insurers have more strict guidelines than others and were one insurer does not offer a satisfactory outcome it can be worthwhile shopping around for a better deal.
3) I don’t need life insurance! If only we were all in that situation, but the reality is normally quite different. Life Insurance provides a capital amount on death; it can be used to pay off debt, pay for funerals, and to be used to provide an income for family left behind. Could your family source the funds needed immediately for funerals? Could they continue to pay the mortgage? A person can apply for as little as $10,000 life insurance or as much as is needed. Even some cover is better than better than none. People from all walkers of life including retirees and homemakers can have a need for life insurance.
4) Life Insurance is expensive! The myth that life insurance is more individual as the notion of value is different for everyone, but let’s compare the cost of life insurance compared to other types of insurance. A typical car insurance quote for a 40 year old male to insure a car valued at $19,000 (comprehensive car insurance) costs around $600 p.a. That same premium will get that same male around $850,000 life insurance cover!
5) If I put the money away in a bank account instead of paying life insurance premiums, I should have enough for my family! If you can save enough for your family to them to be financial secure on death then you likely do not need life insurance, however let’s look at the life insurance v. car insurance example above. If he saved $600 a year it would take 1416 years to save $850,000! What about saving enough in 20 years? He would have to save $42,500 a year! Life Insurance is a cost, but a much lower cost to obtain financial protection than other means!
There are other life insurance myths and the myths vary in creativity but the best advice that we can provide is not the let these myths get in the way of obtaining proper protection for your family. Most people are surprised how financially exposed they are and the right life insurance policy at the right price can
Want to discuss life insurance myths further, or talk about your life insurance requirements? Contact Primoris Financial today to compare 12+ Life Insurance companies to secure your families future!