Time to talk about life insurance

ONE quarter of Australians don’t know who gets their life insurance payout if they die, potentially putting their families at financial risk.

Research by Finder.com.au has found one in four policies could send money to an outdated beneficiary, and 25 per cent of people with life cover in superannuation were not sure if they’d nominated a beneficiary.

Australia’s rise in second families, blended families and unwed couples complicates insurance more, and Finder spokeswoman Bessie Hassan said it should not be put in the too-hard basket.

She said if people did not nominate a beneficiary “it could take months or even years for the proceeds from the life insurance to be paid out – a process that could be very stressful for loved ones”.

Ms Hassan said insurance in superannuation caused a lot of confusion. “Often people don’t realise they’re paying for life insurance cover through their superannuation, so may not have nominated a beneficiary,” she said. “Also, life insurance is a bracket term that can also include other forms of insurance such as total and permanent disability and income protection. This can cause confusion.”

Sorting out life insurance was fairly simple “if you’re healthy, work in an office and don’t regularly go bungee jumping”, Ms Hassan said. “The more you tailor your policy, the more likely you are to have comprehensive cover.”

Life insurance should not be ignored simply because it was bleak, Ms Hassan said.

Laura Crowden, above, a spokeswoman for iSelect, said people often avoided thinking or talking about worst-case scenarios.

“A conversation with your partner about what happens if one of you dies is not something you rush home to chat about,” she said.

However, life insurance should be examined amid any major life changes – such as having a baby, getting married, buying a home or getting divorced, Ms Crowden said.

“Once you have a family, it’s not just about you and your partner anymore – you also need to protect your children’s future.”

Ms Crowden is pregnant with her first child and recently upgraded cover. “We reviewed what was in super and decided that wasn’t sufficient, so we took out separate stand-alone policies for life and income protection,” she said.