Deadly sins when buying Life Insurance
Life insurance provides the capital at death for things like mortgage & debt elimination, capital for education, cover of lifestyle expenses for your family and income for the survivor. Industry Super Funds with their default cover generally only provides a small percentage compared to the real sums needed. If there isn't going to be enough money to do those things that need to be done, then you definitely need to buy life insurance.
Like all essential purchases there are some hard decisions to make that you need to consider.
* Buying insurance online without good professional advice or when you buy insurance over the phone where the assessment process is seen to be simpler! Be very wary.! This type of cover can mean assessment is carried out at the time of claim, not at the time of application. By accessing cover with a financial adviser, you are assessed at application time. This means you and your family have some certainty when you are accepted at application rather than be declined payment because of non-disclosure, exclusions or unfair clauses in inferior products at some time in the future when you are at your mental lowest.
* Advisers give qualified advice backed up with a defining document called a Statement of Advice. So, taking 5 minutes to buy cheap online products can become very expensive if the provider doesn't pay at claims time!
* Thinking your covers are best handled in your Superannuation Fund. Yes, your industry superannuation fund may have a component of insurance included. Generally, it is a minimal amount of protection to a certain age with sometimes blurred definitions for payment. Be aware claims payment needs to be approved by the trustees of the fund. This can take months. Whereas good advisers will confirm not only are they involved in the sales process at application time but also in the claims process and will assist in quickly settling your claim.
Some questions you might like to ask your industry super fund are:
· What support do you give in settling claims quickly?
· Does it cost anything to get claims paid?
· What professional standards do your people have in ascertaining how much cover I should have?
· Does my cover reduce after a certain age?
· At claims time do I have to get my solicitor/accountant involved in the claims process?
· Will my beneficiaries have to go direct to the insurer to gain access to my benefits?
* Only considering price rather than value of the product(s) purchased. Price can play an important part in your decision to buy insurance, but it is not the only thing to consider. Consider things like: the capacity of the insurer to pay, what type of benefits are included, how tight are the definitions of the policies, disclosure of the obligations of the seller, dispute handling processes, claims payment capabilities, what exclusions or limits exist and educational resources if laws or obligations change. Price should be a balance for quality, service and communication. Without professional advice you may be receiving inferior service that eventually costs you a lot more
* Buying insurance with premiums that increase as you get older as you get older the risk factor for insurers gets higher. So, buyers face higher premiums. This causes many to let their policy lapse. Did you know you can buy life insurance with level premium? This means the premium can be averaged over the lifetime of the policy. So, if you are young and looking to keep your policy for some time, have a look at this level premium option.
* Skimping on the amount of coverage you really need. Often people are not aware of the amount of cover they require. This is often predicated because they want to save money on premium, so they reduce the amount of cover they really need. One way to ascertain what people want is to ask a series of questions such as, if you were to die prematurely which option you would prefer for your partner:
They could own the house you live in and never have to work again
They could keep the house you live and not have to work for 10 years
They could keep the house you live but have to go back to work in say 6 months
They lost the house and had to go back to work in 12 months
Try a variation If these questions on the different ages of your potential clients. Cover offers in industry super funds never canvass these critically important questions.
* Not considering the methods of distributing the proceeds of the policy after your demise. Depending on your circumstances you need to be aware of the range of ownership options that affect the speed of distribution of funds from life insurance. Ask you adviser about the following methods of ownership and what happens with distribution of funds:
Owned solely by you on your life and mentioned in a will;
Owned solely by you on your life and not mentioned in a will;
Owned solely by you on your life and left in trust;
Owned by your spouse/partner on your life;
Owned jointly by you and your spouse/partner on your life; or
Nomination of beneficiary options under life cover in superannuation funds
* Failing to review your situation and your covers as life events take place Event changes can be monumental or insignificant. They can range from the birth of a baby to adding a new room to the house; finally going on that south seas cruise to paying off the mortgage or achieving a promotion to re-entering the work force for mum. Every time you achieve a significant milestone in your life you need to have a recalibration of your protection package.
Have a talk us at Heart. Maybe we can save you some money, get you better value for your dollar or provide a better solution for your situation?
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