There are lots of excuses we use to delay getting around to sorting out our life insurance. A recent survey of our customers indicated most people took around six months to decide to get it sorted! That’s a long time when the actual process could take as little as 10 minutes. Some of the reasons given for procrastinating are touted as fact when they have no truth to them at all. We break down these myths and give you the facts.
1. Life Insurance is expensive. A lot of people are surprised how affordable Life Insurance is once they start to get quotes, especially if they are still young and healthy. In 2019 we compared the cost of Life Insurance to Car Insurance after a reporter on Radio NZ claimed it was cheaper to insure your car than your life. Not many of us would choose to drive an uninsured car because we know the likelihood of damage is high, and the cost to repair can be horrendous. Why don’t we make the same choice when it comes to protecting the future of our loved ones?
Fact: Life Insurance can cost as little as $15.60 a month (that’s about $3.60 a week. Less than the price of a coffee a week or a monthly haircut). It usually costs less than car insurance.
2. ‘They’ won’t pay out anyway. Insurance has a poor reputation for not paying claims. Some of this reputation is justified, but most is not. The media are more likely to report on stories that will get attention. Often, this is the things that go wrong and not the things that go smoothly or as they should, because where is the story in that? Which means our view of insurance companies becomes negatively biased unless you’ve had a positive personal experience. Life Insurance claims that end up in a dispute are usually Trauma and Long-term Disability Cover. The reason these claims are denied is usually because of non-disclosure (not telling the insurance company the full truth) or, not meeting the definition for a claim under the policy, for example, being unable to work for a short time as opposed to not being able to work ever.
Fact: In the 12 months to September this year, insurers paid $380 million in Life Insurance claims. Pinnacle Life have paid 99% of all claims as of 14 August 2020.
3. Only the breadwinner needs cover. Families often think to insure the higher-income earner for a high sum insured but neglect to think about the financial and emotional impact of any health or disability crisis or death of a primary caregiver. If you have dependents and one of you has chosen to be at home full time or work fewer hours, then you should also consider the implications if something were to happen to that person. If the primary caregiver were no longer around would the main income earner continue to work the job they are currently in or keep the hours they currently work? Would they need to pay someone else to help with childcare or housekeeping?
Fact: Life Insurance isn’t just about the income you earn. You need to think carefully about what life would be like if the worst were to happen and consider your insurance needs accordingly.
4. My health disqualifies me from life insurance. An existing medical condition will not automatically mean you can’t get life insurance. We ask every applicant health and lifestyle questions, and we use this information to assess your risk – this is called underwriting. If you have a history of a medical condition that could potentially shorten your life, then that’s a red flag to an underwriter. In some cases, that will mean we exclude that condition from your insurance, or we will ask you to pay more in premiums to have it covered. We may also ask for more information from your doctor. It’s worth going through the process rather than just assuming you can’t be covered.
Fact: You don’t know unless you apply. Different companies may have different rules. But at Pinnacle Life less than 1% of our policies pay more to cover health conditions
5. Once I’ve got it, I can forget about it. Life Insurance is a little bit ‘set and forget’, but it’s also important to keep it up to date. Life changes. To increase your cover, we’ll usually have to ask you for updated health details. But for life cover, if you recently married or divorced, became a parent, or took out a mortgage, you might be eligible for our special events increase. You should also take care to keep your details up to date so that if you need to make a claim, everything goes smoothly. It’s a stressful time anyway without worrying about paperwork.
Fact: Life changes and it’s important to make sure you have the right amount of cover as well as ensuring everything will go smoothly if you need to claim.
The key thing to remember about Life Insurance is that it can bring financial security and peace of mind to you and your loved ones. Don’t let the myths put you off even for one more day.
Sources and References:
https://www.pinnaclelife.co.nz/blog/2019/07/03/is-car-insurance-cheaper-than-life-insurance
