5 common mistakes to avoid when choosing personal and life insurance
How best to protect you and your family from the unexpected
Have you ever worried about what would happen to your family if you were unable to work due to injury, illness – or worse still if you were to pass away?
As daunting as this sounds, it’s a very real source of stress and anxiety for many hard-working Australians.
Whilst we can’t prevent the unexpected from happening, we can give ourselves and our family the best protection.
When asked what the most important things in life are – the following are the most common responses we hear: Family, friends, health, and happiness.
However, when asked what the most important insurances are, most of us think of our car, home, or health – personal life insurance1 is the one that is often overlooked.
Personal life insurance is there to protect the things we value most in life – family.
So why is it that only half (approximately) of all Australians hold some form of life insurance? And of those who are insured, why are most under-insured?2
The main reason is this: many people think that they are too young and too healthy to justify getting life insurance.
But unfortunately, accidents happen anywhere and at any time. In fact, a massive 68% of trauma insurance claims were made by people in their 40s,3 and trauma insurance is just one type of personal insurance you can have.
In fact, there are 4 types of personal insurance to protect you and your loved ones.
The 4 types of personal insurance:
- Life insurance (aka. Life Cover): pays a lump sum when you die so your beneficiaries (usually your family members) can continue to live securely.
- Total and Permanent Disability (TPD) Insurance: a lump sum payment to help with rehabilitation and living costs if you have an accident or illness that means you are permanently unable to work.
- Trauma Insurance: if you suffer from a serious medical condition (like cancer or stroke), you receive a lump sum to financially support you and your family and fund medical expenses.
- Income Protection: pays some of your income if you can’t work for a period of time due to illness or injury (not to be confused with Workers Compensation which only covers you for work-related conditions and injuries).
So how do you know which cover and which life insurance policies are suitable for you?
More to the point, how do you avoid the common mistakes that so many Australians make when selecting personal insurance to ensure you and your family are adequately protected for the future?
The big 5 mistakes to avoid when it comes to selecting life insurance:
Mistake #1: Assuming it’s too expensive
You’re not alone if you’ve put off buying life insurance because of the cost. But life insurance may be cheaper than you think.
“For a millennial to purchase a life insurance policy, that policy could be the same price as their Netflix subscription.”4– Faisa Stafford, CEO and president of Life Happens.
What’s more, like your car insurance and health insurance, you need to change your mindset to view personal insurance as an investment into your future.
When you begin to see that the returns of life insurance outweigh the cost, you will never think of personal insurance as ‘too expensive’ again.
Mistake #2: Not understanding what you’re buying
It’s well and good to have an insurance policy in place but if you don’t understand what you’re covered for, you may not have the right cover for you.
The first step is understanding the four different types of life insurance5and determine what combination of cover is suitable for you.
Life insurance can be a difficult and overwhelming concept to wrap your head around. At CCFPG, we take pride in offering simple explanations of complex things like life insurance and how it can best protect you and your family. Talk to us about life insurance today.
Mistake #3: Assuming any health problems you may have will stop you from getting covered
Don’t assume that you can’t get life insurance at an affordable rate if you have a health concern.
Every life insurance product and provider offer different policy terms. Finding the best deal for you just may mean you have to shop around a little and read the fine print.
Alternatively, if you want to save time and energy whilst ensuring you have the most appropriate product for you, a financial adviser can help you select an insurance policy that is suitable to your circumstances and consider an affordable ownership option for you.
Mistake #4: Not taking out an insurance policy earlier
Many Australians think they are too young and healthy to warrant buying life insurance. Life throws curve balls at you when you least expect it and 60% of working Australians will, at some stage, need to take a prolonged break from work due to illness or injury6. You never know when that break may be needed.
Plus, the cost of personal insurance tends to soar after the age of 357so it makes financial sense to get your insurances in order sooner rather than later.
Mistake #5: Not getting financial advice
Life insurance should be part of a comprehensive financial plan. You should consider working with a financial adviser for support in selecting the right insurance policies for you.
We consider policy features, ownership structures and premium terms that keep your policy affordable long term as well as consideration of taxation implications for premiums paid and any claims received.
At CCFPG, insurance is one of our specialties and is something we believe is an integral part of your overall wealth management plan.
Looking to protect you and your family from the unexpected?
Talk to one of our experienced Financial Advisers today. Book an initial appointment; we have offices located in Central Coast – Erina (CCFPG), Newcastle – The Junction (NFPG) and Sydney CBD (SWA).
REFERENCES
1 https://www.centralcoastfpg.com.au/services/insurance/
2 https://www.tal.com.au/slice-of-life-blog/how-many-australians-have-life-insurance#:~:text=There%20are%20almost%2022%20million,Institute%20of%20Health%20and%20Welfare.
3 http://www.asteronlife.com.au/the-danger-decade-for–australians
4 https://www.forbes.com/advisor/life-insurance/mistakes-when-buying/
5 https://moneysmart.gov.au/how-life-insurance-works
6 RI Advice Group Pty Ltd “Life protection solutions: How they fit together – to cover you and those who depend on you”
7 https://riarticlehub.files.wordpress.com/2020/06/articlehub_2020_7_insurance-get-insurance-while-youre-still-bulletproof.pdf
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
