When it comes to life insurance and income protection, the majority of Australians aren’t sufficiently covered. Are you one of them?Continue reading
(Australian Associated Press)
Australians should talk more about death and dying so they can plan for the final stage of their lives, a group of experts is warning.
A lack of acceptance, communication and planning means that many Australian’s preferences about the end of their lives are not understood or championed, they say.
The topic of death makes people in Australia uncomfortable, says Professor Ken Hillman, an intensive care expert at the University of New South Wales.
Although the majority of deaths in Australia each year are predictable, few people – just 15 per cent – have care plans to guide their final days. Seventy per cent of Australians prefer to die at home or in a home-like setting, but only 14 per cent do so currently.
Death and dying are “highly medicalised”, with health professionals focusing on their own priorities over those of the patient, which usually include preservation of dignity, company, and a peaceful, pain-free death, according Professor Hillman.
Professor Hillman is a member of The Violet Initiative, a social enterprise working to reduce regretful outcome for people in the last stages of their lives.
The Violet Initiative’s CEO, Melissa Reader, says caregivers are often the key decision makers.
“A ‘good’ last stage of life would involve many more Australians having more compassionate and dignified deaths, with their preferences aligned with their experiences,” Ms Reader said.
“Families and their caregivers would be offered relief, feel more resilient while going through this difficult experience, and in turn, would be able to return to life and work more fully.”
The group is calling for systemic change in the healthcare, community and aged care sectors to improve planning and encourage communication around the final life stage.
Your life insurance is flexible and can be adapted to your changing needs. Make sure you have a cover review with your adviser every 12-18 months to ensure you’re covered or when major life events occur, for just the right amount, paying the right amount, and getting the best value from your policy.
Every 12-18 months, make sure you ask yourself, have you:
Welcomed any new members to the family or taken on new responsibilities such as caring for an older relative?
You might want to add a new beneficiary to your policy or increase your amount insured to cover for your growing family’s future needs and the increased financial responsibility you have.
Changed jobs or got a promotion?
Your income is your biggest asset over the course of your life. If your income has changed, your future needs have likely changed too – so you’d benefit from reviewing your sum insured with your financial adviser.
This is especially important if you’ve got income protection. That’s because your benefit amount, and the premium you’re paying, are directly linked to the personal income we have recorded on your policy.
If your income has changed, get in contact with your financial adviser to review your policy.
Paid off large debts?
The amount you’re insured for is to cover for your future financial needs should something happen to you. If you’ve significantly paid down large debts, your needs may have changed.
You may want to think about reviewing your sum insured to ensure it’s right for your needs – not too little, and also not too much.
Taken on any new debts?
Being insured for the right amount is an important factor of cover suitability. Customers usually need a level of cover that can, as a minimum, pay off any existing debts should something happen to them. If you’ve taken on new debts, your needs may have changed.
You should review your cover with your financial adviser to ensure you’re covered for the right amount.
Does your policy have a health loading? Has your health improved – or have you stopped smoking?
Personal risk factors such as smoking and your Body Mass Index (BMI) add what are called ‘premium loadings’ to your cover – which means you pay a higher premium than someone who doesn’t have this risk factor.
If your health has improved (e.g. you’ve lowered your BMI or your lifestyle has changed recently), get in touch with your financial adviser to review your policy and determine if these loadings can be removed to help lower your premium.
If you answered YES to any of these questions, you could benefit from reviewing your cover with the help of your financial adviser.
Ways you can adapt your cover to your current needs:
1) Choose the amount you’re insured for
Your premium is closely linked to the total amount you’re insured for. And it’s important to make sure you’re covered for the right amount, not too little, not too much. To find out more, see How much cover do I need?
Choosing the premium type that’s right for you can have a big impact on the lifetime cost of your policy, and your financial adviser will be able to help with forecasting that impact.
2) Choose to accept or decline indexation
Indexation, if available, is an automatic increase to your sum insured to ensure the value of your policy is not eroded by the impacts of inflation.
But you’re in control – it’s important to know that as the sum insured increases, the premium you pay may also increase. This means there are circumstances in which you might want to decline the indexation offer. Speak with your financial adviser about what is best for your personal circumstances.
3) Remove any loadings you might have
Personal risk factors such as smoking, dangerous hobbies or occupations, or a high Body Mass Index (BMI) may add what’s called a ‘premium loading’ to your cover – which means you pay a higher premium than someone who doesn’t have those risk factors.
Any loadings like these are recorded on your Policy Schedule. So, if your health improves or your lifestyle has changed recently, get in touch with your financial adviser to review your policy and determine if these loadings can be removed to help lower your premium.
In the end, you’re in control – you can review your cover with your financial adviser and adapt it to your needs.
Stay in control of your policy – book a cover review with your adviser every 12-18 months.
Some advisers offer a review service every 12-24 months, so make sure you enquire about this in order to stay in control of your policy.
Financial protection for your loved ones when you die
A sudden death can place financial stress on those who depend on you. If this happens, life cover can help them pay the bills and other living expenses.
What is life cover?
Life cover is also called ‘term life insurance’ or ‘death cover’. It pays a lump sum amount of money when you die. The money goes to the people you nominate as beneficiaries on the policy. If you haven’t named a beneficiary, the super trustee or your estate decides where the money goes.
Life cover may also come with terminal illness cover. This pays a lump sum if you’re diagnosed with a terminal illness with a limited life expectancy.
Accidental death insurance is different from life cover. It will only pay out if you die from an accident. It will not provide cover if you die from an illness, disease or suicide. This type of cover often has a lot of exclusions.
To understand what’s covered under a policy and the exclusions, read the Product Disclosure Statement (PDS).
Decide if you need life cover
If you have a partner or dependents, life insurance can help repay debt and cover living costs if you die.
If you don’t have a partner, or people who depend on you financially, you may not need life cover. But consider getting trauma insurance, income protection insurance or total and permanent disability (TPD) insurance in case you get sick or injured.
How much life cover you might need
To decide how much life cover to get, consider how much money you or your family would:
- need — to pay the mortgage, credit cards and any other debts, child care, school fees and ongoing living expenses
- receive — from super, savings, the sale of any investments, your paid leave balance, and support from your extended family
The difference between these is the amount of cover you should get.
Work out if you need life insurance and how much cover you might need.
If you need help deciding if you need life cover, and how much, speak to a financial adviser.
How to buy life cover
Check if you already hold life insurance through super. Most super funds offer default life cover that’s cheaper than buying it directly. You can increase your level of cover through your super fund if you need to.
You can also buy life cover from:
- a financial adviser
- an insurance broker
- an insurance company
Life cover can be bought on its own or packaged with trauma, TPD or income protection insurance. If it’s packaged, your life cover may be reduced by any amount paid on other claims in the package. Check the PDS or ask your insurer.
Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.
Life cover premiums
You can generally choose to pay for life cover with either:
- stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age
- level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time
Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.
Compare life cover
Once you know how much life cover you need, shop around and compare:
- benefits and policy features
- waiting periods before you can claim
- limits on cover
- the cost of the premiums — now and in the future
A cheaper policy may have more exclusions, or it may become more expensive in the future. You can find information about the policy on the insurer’s website or in the Product Disclosure Statement (PDS).
Compare how long it takes different insurers to pay a life cover claim and the percentage of claims they pay out.
What you need to tell your insurer
You need to tell your insurer anything that could affect their decision to insure you. You need to give them this information when you apply, renew or change your level of cover.
Insurers usually ask for information about your:
- medical history
- family history, such as a history of disease
- lifestyle (for example, if you’re a smoker)
- high risk sports or hobbies (such as skydiving)
If an insurer doesn’t ask for your medical history, it may mean that the policy has more exclusions.
The information you provide will help the insurer to decide:
- if they should insure you
- how much your premiums will be
- terms and conditions for your policy
It is important that you answer the questions honestly. Providing misleading answers could lead an insurer to deny a claim you make.
Making a life cover claim
If someone close to you dies and you need to make a claim, or if you need to make a terminal illness claim, see how to make a life insurance claim.