Most people don’t know what life insurance is
MILLIONS of Australians with life insurance are in the dark about how it protects them, new research suggests.
A study by NobleOak Life found 27 per cent of consumers do not know what is covered by their life, total and permanent disability, income protection and trauma policies, with many of them confused.
And more than 20 per cent are not confident they would be paid if they had to make a claim.
NobleOak CEO Anthony Brown said the findings were “very concerning”.
“The reality is life insurance people can use a lot of jargon, and life insurance is often not well explained over the phone if you buy from insurers directly,” he said.
“Insurers can be more interested in selling you a policy instantly than outlining what you are getting covered for.”
Life insurance documents such as product disclosure statements were often over-technical, Mr Brown said.
There has been criticism about some cheap policies sold over the phone with very few medical history details collected. Instead, the underwriting happens if a claim is made, resulting in some claims being rejected.
Reports of rejected claims by some big companies have also affected people’s perceptions.
“We have noticed a sharp drop in consumer confidence about claims being paid over the last year, largely as a result of bad publicity with respect to a couple of the larger insurers not paying claims quickly – or at all,” Mr Brown said.
Wealth For Life Financial Planning principal Rex Whitford said the lack of knowledge about life insurance was not surprising, given that most people did not want to think about death or disability.
He said people could avoid worries about claims being rejected by getting good advice.
“I have never had a genuine claim not paid,” Mr Whitford said. “A quality adviser will hold your hand and get the job done.”
Mr Whitford said some policies were cheap for a reason. “The fly- by- nighters are cheap because they are trying to capture market share. And they’re cheap because they never pay,” he said.
Medical history should be checked when starting a policy, not after a claim when it could dramatically increase stress. “Who needs that? If you are on your death bed, that would probably kick you over the edge,” Mr Whitford said.
“You need a strategy — a properly crafted plan relating to your own personal circumstances.”
Mr Brown said there were several information sources to find out about life insurance, such as ASIC’s independent lifewise. org. au website, or popular comparison sites such as Canstar or Finder.
He said people should shop around for the right policy and get quotes from different insurers while comparing terms and conditions. NobleOak recently launched a guide to life insurance.
“You need to be wary of exclusions in some policies, such as pre- existing condition exclusions. I suggest you ask the insurer if there are exclusions you should know about.”