There is plenty of fact and fiction when it comes to life insurance. In this article we will explore some of the more important facts around life insurance, as well as a few of the myths.
Life insurance does pay
Life insurance companies in Australia pay out an enormous amount of money to policy holders every year.
According to data provided by Australia’s leading insurance companies, in 2010 they paid out a combined $1.6 billion in term life insurance claims, and a total of $3.5 billion across all life insurance categories including income protection, trauma and TPD insurance.
The above figures equate to over $14 million paid to 245 Australians every single working day of the year.
These figures do not include payouts from foreign owned insurance companies or group life insurance held with superannuation funds, so the true figures would be even higher.
It is a fact that Australia suffers from chronic underinsurance when it comes to life insurance and associated covers.
According to data released by Life Wise in 2009, Australian parents with dependent children are underinsured by a total of $1.3 trillion dollars. Put another way, only 4% of Australian parents have adequate life insurance to protect their family.
Despite being one of the most prosperous nations on earth, Australia is also one of the most underinsured in the developed world.
You don’t have to die to claim on life insurance
Term life insurance doesn’t just pay when you die. All policies issued by the major Australian life insurance companies will also release your payout if you are diagnosed with a terminal illness. A terminal illness is one that is expected to take your life within a short timeframe, for example twelve months.
There are also other forms of life insurance that will payout whilst you are still living. These include income protection, TPD and trauma insurance.
Life insurance does cover suicide
There have been plenty of movies and television shows that involve one of the characters making their suicide look like an accidental death to ensure that their family receives the life insurance money.
This has created the myth that suicide is not covered by life insurance. Whilst this may be true with a small handful of policies, the fact is that almost all life insurance policies issued in Australia do cover suicide.
There is a slight catch however. The policy will cover suicide, but not within the first thirteen months of the policy. The reason for this is that life insurance company research indicates that people are less likely to plan their own suicide more than thirteen months out from the event.
Life insurance can be more important than home insurance
Many Australians are not concerned about their lack of adequate life insurance, however they would never consider leaving their home or cars uninsured.
Statistics released by Comminsure show that life insurance can be more important than home insurance, with their research showing that for every one home lost to fire, four homes are lost due to the death of a household member and a staggering 48 homes are lost due to disability.
These losses are as a result of the financial consequences of death and disability.
As we can see, life insurance pays out billions of dollars and helps thousands of Australians every year. Life insurance can be a very cost effective way of protecting your family’s financial security.