As Australians should take serious consideration when making life insurance decisions, many have questions and issues to resolve before reaching an informed decision. Here we present and address some of the most frequently asked questions regarding life insurance coverage.
Is life insurance worth having?
Answering this question simply, life insurance needs vary for each individual and are impossible to predict with accuracy. It is true to say that individuals with families and dependents would be wise to consider taking out a life insurance policy to protect their loved ones if the worst should happen. Experienced life insurers know the significance of life insurance to help provide for family in times of death; its value should never be underrated.
What are premiums?
Premiums are the amount you must pay to keep your life insurance or other policy live and valid. The amounts vary significantly depending on your exact circumstances and requirements and the amount of coverage/length of your policy. Premiums can usually be paid in monthly, 6-monthly, or annual increments.
What does underwriting mean?
Underwriting refers to the steps an insurer will take to assess your eligibility for life insurance. The results of their findings have a direct correlation with the amount of premiums required to purchase the policy and may include some of the following elements:
- Medical history and pre-existing conditions – Although you are unlikely to be asked to undertake a separate health check, your medical records and history will certainly be taken into account.
- Hereditary ailments – Any evidence of hereditary ailments in your wider family will also be considered.
- Lifestyle choices – Including, but not limited to, individuals who live unhealthy, reckless lifestyles and smoke, drink, or take drugs. Dangerous hobbies and pastimes are also pertinent, and individuals who regularly leap off the 75m coastal cliffs at Strzelecki Point in NSW with a paraglider are likely to pay higher premiums.
- Occupational hazards – Insurers will have a comprehensive list of typical Australian occupations and their inherent risks. Most workers with low-risk jobs won’t be affected, while those working in dangerous trades and industries might face higher premiums or in some instances be denied life insurance altogether.
Do I need to undergo a medical test to be eligible for life insurance?
Answering that question honestly depends. If you have preexisting medical conditions that need monitoring, an initial medical check might be required in order to evaluate its severity; otherwise, a health examination is usually unnecessary when applying for standard life insurance policies.
What is indexation and will it apply to my life insurance policy?
Indexation is the process whereby any life insurance policy is linked to current levels of inflation and rises accordingly. In Australia, the cost of living, as determined by the Consumer Price Index, is also a strong influencing factor, and some insurers will raise the level of coverage by that amount instead if it is higher than the inflation rate.
