Most of us like to think that insurance is a set and forget proposition that we pay for without too much consideration. However no one can predict the future. Illness or injury can strike at any time with potentially devastating consequences. Australian Bureau of Statistics data shows that medical illnesses are the leading causes of deaths in Australia. Topping the list are several types of cancer, Ischemic heart disease, stroke, Alzheimer’s disease and dementia. The health risks are clear yet many Australians are manifestly ill-prepared for these life events.
According to Rice Warner’s ‘Underinsurance in Australia’ report, an average Australian couple around 40 years of age with children would require life insurance cover of approximately 10 times their annual earnings to repay debt and maintain their current living standards. However very few Australians have anywhere close to this level of insurance cover.
It’s common for people to have an “it won’t happen to me” mentality, but unfortunately the facts speak for themselves. Taking some time to understand more about life insurance is worth its weight in gold as it could protect the financial stability of those you care for if you can no longer work or pass away.
Here we look at some common myths about life insurance.
Myth One: ‘I’m young and healthy. I don’t need life insurance.’
It’s easy to think you don’t need life insurance when you’re young, fit and healthy. But life has a funny way of ‘just happening,’ and if you are about to experience a significant life event such as getting married, having a baby, or buying your first home, you need to consider what could happen if the unexpected were to occur. For instance; if you were left without an income, how would you and your dependents cope financially?
It’s also important to consider what your health may be like in the future. Although you may be young and healthy now, unfortunately deteriorating health is a natural part of life. It’s a good idea to consider taking out life insurance early on in life, when you’re less likely to have any pre-existing medical conditions, as these could make you ineligible for life insurance cover or attract higher premiums when you’re older.
Myth Two: ‘I’m single and I don’t have any dependents. I don’t need life insurance.’
According to the Australian Institute of Family Studies, the number of Australians living alone is as high as it has ever been with one in four people living in a single person household. And that’s been the case for more than a decade now. While many of us are happy living alone, many of us also have financial responsibilities that aren’t linked to having a partner or a child.
Myth Three: ‘Life insurance is only worth it if you pass away.’
One main objective of life insurance is to provide financial security for your loved ones should you pass away. However life insurance also provides protection should you become critically ill, injured in an accident, or permanently disabled. Should this occur and you are no longer able to work, life insurance can help you to pay for out-of-pocket expenses such as the cost of medical treatment and other household bills.
Myth Four: ‘My superannuation fund includes life insurance cover. I don’t need any more.’
Many super funds offer some form of life insurance for members. However it’s often just a very basic level of cover and may not take into account your individual circumstances nor the amount of cover you would really need to maintain your standard of living if you could no longer work. This is where professional advice can help. Your financial adviser can tailor an insurance plan that’s designed specifically for you. This includes a review of any existing insurance policies you may have, an analysis of your financial obligations, and the level of financial support you want for your dependents; both now and into the future.
Myth Five: ‘I have private health cover. I don’t need life insurance.’
There’s no denying that private health cover can be immensely beneficial if you require urgent or costly medical treatment. However in many cases it won’t provide cover for ongoing post-operative costs such as any rehabilitation, or those financial obligations that continue while you’re unable to work, such as household bills and your mortgage repayments. Personal insurance can help by covering these additional expenses, and help protect your family’s financial situation should you be unable to return to work.
Reviewing your insurance arrangements with your financial adviser makes good sense. Even if it simply confirms that your existing insurance cover is fine. To find out more, contact your adviser.