Tips and Traps of Life Insurance

Most people give almost no thought to either needing this type of insurance or what they are getting when they do. Here are some basic tips and traps:

1. You get what you pay for! (Sound familiar) In other words if you have a cheap policy, it may be cheap only until you really need it, then some fine print excludes the claim.
2. You are most likely to underinsure yourself. Chances are you are only thinking of why you need cover now for and not what your past needs or future requirements are! What is your situation like when you think about this? Worst case situation – use your Super to pay for what you really need and get some professional advice.
3. Insurance companies actually do pay claims but if you use ones from overseas you could get caught out.
4. A stepped policy is only cheaper for the short term, and chances are you are taking the cover for a longer term commitment such as a mortgage or an addition to the family. A stepped policy will make the insurance company more money out of you in the long term.
5. Tell the whole truth on the application form, as the insurer can access your medical records from the past.
6. If you have any skeletons in your closet, make sure you have a binding nomination for your beneficiaries and go get a will done professionally not a will kit.
7. The younger you are when you take it out; the cheaper it is likely to be in the long term.
8. A person on a stepped policy is most likely to cancel a policy before they are likely to claim on it. Insurance companies know this so don’t let the financial institution sell you a stepped policy as it may increase yearly in price, and cost more in the long term. You may be inclined in your 50′s to cancel a stepped policy as it becomes very expensive in latter life, just when you are most likely to claim on it.
9. Don’t be sold something that is poor quality. Do you think if they will insure you regardless of your heart condition that they are actually going to pay out for that? Accidental death policies may be a waste – consider saving the money unless it is the only insurance cover you can get, after trying your other options.
10. Take independent professional financial advice and not just a call centre salesperson on the phone. The bank /call centre rep may have little or no experience and can only sell you a few products. That isn’t indpendent advice!

Please understand these are personal views only. Seek professional advice for your own situation. For further information, contact Michael Ord, director of Coremotion Financial Services Pty Ltd.