So you’ve decided to take out a life insurance policy. Nice one!
While life insurance isn’t exactly exciting and can seem quite complicated, there is a certain peace of mind that comes with knowing exactly what cover you have.
Perhaps you’ve ventured into self-employment, welcomed a new family member, or decided the time is right to be more proactive about your future. For each of these scenarios and more, life insurance offers protection and a level of assurance that your family, property, and assets are cared for now and in the future.
But before you sign on the dotted line it’s important you know exactly what your cover includes. A clear understanding of what benefits are included in your policy, and why certain elements aren't, will put you in a better position if you need to claim, removing any surprises at a stressful time.
Know what you need
Ask yourself: what do you expect from a life insurance or income protection policy? Better yet, what do you need from an insurance policy to feel secure and protected?
As you consider your own financial needs and those of your family members, you’ll develop a checklist of must-haves which you can compare different policies against. There are no one-size-fits all when it comes to life insurance, so it’s always good to know what each product covers and what benefits are included in that policy.
Although the price is a good place to start when comparing cover, it’s also important to look at the benefits provided and any exclusions or limitations to make sure you’re getting good value too, especially if you’re changing from one insurance product to another.
You can get a good understanding of these benefits from the Product Disclosure Statement or from a comparison website like Lifebroker, which helps you compare the features and benefits each option as well as the premium.
What is underwriting and why does it matter?
Underwriting is the insurer’s process of assessing an application for cover to understand that person and their individual situation to ensure they can offer them cover that will be available when they need it most.
Unlike health insurance, life insurance that is underwritten with an application upfront means the insurer gets to know the individual and the premium is calculated based on their situation, not just one size to fit all.
For example, if you have high blood pressure, the insurer may increase your premium to be able to provide you cover even though you have a pre-existing condition; this is called a premium loading.
Or the insurer may offer you cover with an exclusion, which means you can still have cover in place, you just won’t be covered for something that specifically relates to that exclusion, for example a back injury exclusion. Although this may feel like you’re missing out, you will know exactly what you’re covered for before your cover starts, and that’s better than having no cover at all.
Each insurer is different in what cover they offer, so it’s always good to ask around and see what’s available.
PSA: Read the PDS!
What’s a PDS, you ask? Providing a Product Disclosure Statement (PDS) is a regulatory requirement for all Australian financial service providers, and its importance cannot be overstated.
It provides all the important details of the product and the cover it offers, including definitions to help you understand what you can claim on, as well as a summary of the benefits included, such as rehabilitation benefits or a grief counselling benefit for your family.
When shopping around for insurance, it’s essential you familiarise yourself with each insurer’s PDS. That way:
- You don’t purchase an insurance policy that isn’t right for you
- In the event you make the purchase and need to submit a claim, you know exactly what to do and what you’re covered for. No surprises!
To get started, try out Lifebroker’s life insurance comparison tool, which is quick and easy to use. Drop in your details and you’ll gain instant access to insurance products from some of the leading life insurers in Australia with the details to help you make a confident decision for your cover.
This article is general advice only; please visit www.lifebroker.com.au for more information.