Myth busting

In life, there’s a range of myths; from the fringe-”the moon landing was faked”, to the mainstream-”house prices only ever go up”

Similarly, there are various myths around life insurance. Let’s look at a few of these, alongside the facts.

Myth 1 – “Insurance companies don’t pay at claim time”

2009 CLAIMS PAID BY PRODUCT TYPE –

The risk store has compiled this table to show the contribution that life risk industry makes to its policyholders’ families and businesses. The companies whose statistics are included in this table are listed below: Each year the risk store will update these statistics so that consumers can understand what a great job this industry will do for them when they need it!

The retail companies whose statistics are included in this table are listed below.

[These figures don’t include all the vast amounts that are paid from superannuation funds’ group insurance policies for ‘early retirements’ due to illness, injury and death, so the reality is much more than shown here]

This enormous amount would not be paid at all if it weren’t for the work that is done with consumers, by advisers, to protect family lifestyles and assets and businesses from the devastating effects of illness and injuries.

An average $11.14 million per working day was handed over to support Australians. This is what advisers make happen.

These statistics are the aggregate from the following companies: AIA Australia ,AMP , Asteron , AXA (includes AC&L) , BT , CommInsure , ING , Macquarie ,MLC/Aviva , Tower , Zurich

Think on this:

• Not one of these claimants expected to claim on their insurance…

• If these claimants hadn’t received $2.78 billion from insurance policies… where else would they have got that kind of money?

• This is not a one-off statistic: in 2006, 10 companies paid out $2.03 billion; in 2007 11 companies paid out $2.1 billion; in 2008 13 companies paid out $3.05 billion

That’s a lot of people who didn’t ever want to claim – but had to

Myth 2 – “I can’t afford insurance”

Life insurance can be surprisingly affordable, and can cost as little as few dollars a day.

For example, for $3.41 a day*, a 35-year-old female office manager earning $60,000 p.a. could buy a policy that pays a monthly benefit of up to $3,750 if she temporarily couldn’t work because of illness or injury.

Or for the equivalent of $1.96 a day^, a 45-year-old female nurse could buy a policy that pays a benefit of around $152,256 in the event of a medical trauma such a stroke or cancer.

Remember these are examples only; the actual cost for you may vary according to a range of factors including your age, gender and benefit amount chosen.

* Based on an Asteron Lifeguard Income Protector policy, non-smokers, stepped premium paid annually, Queensland residents, 30 day waiting period, benefit period to age 65, increasing claim.

^ Based on an Asteron Lifeguard Recovery Stand Alone policy, stepped premium paid annually, Queensland resident.

Myth 3 – “I’m single, so I don’t need insurance”

Even if you’re single, most forms of life insurance could prove invaluable if something were to happen to your health.

For example, if you couldn’t temporarily work because of illness or injury, income protection insurance could help by paying you a monthly benefit – generally up to 75% of your lost earnings. The insurance money could help cover your living costs such as mortgage or rent, groceries and bills.

Myth 4 – “I have enough insurance through my super fund”

It pays to carefully check any existing insurance you have through your superannuation fund.

While this type of cover can be cost-effective, it is generally not tailored to your individual circumstances, so is less likely to be adequate for your needs.

As well, super funds seldom offer the full range of insurance products, meaning you might be missing out on an important type of cover.

You need weigh these pros and cons carefully. VENIÕ Financial adviser is an expert in this area and can help you.

Myth 5 – “Health insurance is the only insurance I need”

Private health insurance only covers medical expenses – and even then, sometimes not the total amount.

Life insurance, on the other hand, can be used to cover gaps in medical costs and – significantly – to help cover household costs such as mortgage or rent, groceries and bills.

Myth 6 – “Government assistance would be enough”

The Government offers a Disability Support Pension, administered by Centrelink.

However, the maximum amount payable is modest at around $658* per fortnight. This is equivalent to $17,118 per annum, less than a third of the average Australian salary.

You need to consider: would the Disability Support Pension be enough for you; for your mortgage or rent, groceries, bills and living expenses?

* As at 1 January 2011