5 things you need to know about life insurance
Life insurance offers important protection for millions of Australians, making it critical to understand the benefits as well as the latest news.
Life insurance comes in many different forms such as life cover, Trauma/Critical illness insurance as well as Income Protection and Total and Permanent Disability. Each of these play an important role in protecting you and your loved ones when it is needed most.
Unfortunately many people remain unsure how much life insurance they need. Throw in constant regulatory change and many Australians may not have the cover they assume they have or some may even be holding back on purchasing life insurance.
Below are 5 things we think you need to know about life insurance.
# 1 : People making life insurance claims are younger than you think
The average claim age for life insurance is only 66 years for men and 63 years for women, according to data provided by life insurer Clearview.
This shows the importance of insuring against the unexpected, whether that be a terminal illness or death due to an accident or illness.
# 2: Insurance claims involving advisers are more likely to be accepted
A comprehensive 2016 life insurance survey by the corporate regulator, Australian Securities and Investment Commission (ASIC), found claims were denied in just 7% of claims when a financial adviser was involved.
Life insurance claims through a superannuation fund (known as group insurance) were declined in 8% of cases while direct life insurance (sold through a call centre or over the internet) were declined in 12% of cases. One insurer via direct sales declined 29% of claims while one insurer via a superfund declined 23% of claims suggesting a skilled financial adviser can be invaluable not only to ensure you have the right amount of cover in place but to ensure the cover is provided through a reputable insurer with a good claims record.
# 3: Most life insurance claims are processed quickly
More than 130,000 life insurance claims were processed in 2017-2018 by the major insurers that have signed up to the new life insurance code of practice.
The industry reported that 89% of income related insurance claims were decided within 2 months whilst 92% of non-income related claims were decided within 6 months.
# 4: New legislation may close your insurance if it’s attached to super
From July 1, 2019 super accounts with insurance that are inactive for 16 months have had their insurance cancelled.
Many superannuation funds automatically include life insurance, unfortunately many people are unaware that they have it or have not taken the time to consider whether the amount of cover is sufficient.
# 5: Life insurers want a regulatory overhaul so they can offer rehabilitation benefits
Employment provides people with the money they need to support their lifestyle. However, those who are incapacitated and unable to work lose more than just an income, it can also dent their self-confidence and happiness.
Life insurers are lobbying for change to legislation which would allow them to fund treatment for Australians at risk of long term incapacity where they are not covered by private health insurance or stuck on public healthcare waiting lists.
Research suggests such reforms could benefit up to 10,118 people per year while 87 people could be prevented from becoming totally and permanently disabled. Early intervention by insurers could also cut return to work times from 18 to 13 weeks.