In theory, life insurance is pretty simple. The devil is in the detail.
Here are 5 common mistakes to avoid when reviewing your life, total permanent disability (TPD), income protection, and trauma insurance.
1. Thinking you’re covered through super
Although superannuation often includes some insurance cover, this may not be enough or the right kind for your situation. Default super funds are only required to provide you with coverage for death and TPD so this might exclude insurance protection and trauma cover. It’s worthwhile reviewing your existing cover with a professional to ensure you have enough cover for your needs.
2. Setting and forgetting
You need to make sure you have the right cover for your needs. And over time, those needs change. You land your first job, you get married, you buy a house, you change jobs, you have children, inherit money: all these life events will change the amount of cover that is right for you. Over time, advances in medicine and changes to policy wording based on those advances may also mean your policy may no longer address your needs and alternative cover might be more suitable.
3. Too much cover, not enough cover
Make sure you have the right mix of insurances to protect your family. It’s easy to have too much of one insurance and not enough of another. A good way to find this out is to perform a needs analysis outlining what aspects of your life you would like to cover in the event of death or disability and the assets you currently have to cover these risks.
4. Insuring yourself but not dependent children
What will happen if your child becomes seriously sick or injured? Of course you would want to take time off work to care for them, but your personal policies only provide cover if you become sick. Not to mention the cost of medical care. Child cover can provide a lump sum if your child suffers a serious illness or injury such as diagnosis with cancer or suffering severe burns (refer to the product PDS to see if this is an option and what it covers). The money can help you take time off work to focus on what matters most.
5. Not understanding what your insurance policy covers
Some people think their income protection insurance will cover them until retirement but they have only elected for two years of cover. Others think they have death cover but really only have accidental death cover (which accounted for only 1.7% of deaths in 2016*). Don’t wait until you claim to find out what your insurance covers you for.
If you think you are in danger of falling into any of these traps, speak with a financial adviser who can guide you through a structured process to avoid these common pitfalls.
This article has been prepared by BT Financial Group and is current as at 21 June 2018. BT Protection Plans are issued by Westpac Life Insurance Services Limited ABN 31 003 149 157 (WLISL), except for Term Life as Superannuation and Income Protection as Superannuation which are issued by Westpac Securities Administration Limited ABN 77 000 049 472 (WSAL) as trustee of the Westpac MasterTrust ABN 81 236 903 448. WLISL and WSAL are wholly owned subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (the Bank). The Bank does not guarantee the insurance. The information in this document does not take into account your personal circumstances. The insurance is subject to terms and conditions, and limitations and exclusions apply. Please read the Product Disclosure Statement to see if this insurance is right for you. This can be obtained by calling 1300 553 764 or visit https://www.bt.com.au/personal/insurance/solutions/term-life-insurance.html. © BT Financial Group – a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714