There’s a few misconceptions and myths about life insurance – like ‘insurance is a rip off’, or ‘I’m young and healthy – I don’t need it’. In actual fact, what you pay for life insurance is small when compared to the benefits that it can deliver. Life insurance is there to help your family manage the financial impact of an unfortunate event, like a terminal illness or death. And while it’s arguably a necessary insurance to have, many people still don’t have it.
Whether it’s the fear of dealing with all the legal jargon and fine print, or concern about selecting an unsuitable policy for your needs, it’s important to know that life insurance doesn’t have to be impossible.
If you believe in some of these myths yourself, here are some facts that might help you to put life insurance in perspective.
1. I am young and healthy – so I don’t need it
You might be fit and healthy now, but anyone can have an accident or fall ill unexpectedly. Whilst life expectancy rates in Australia are continually improving, with women living on average 84.3 years and men living 79.9 years1, no-one can tell when their time will come. In 2012 there were over 10,000 deaths for people aged between 25 and 542.
2. I only need the minimum
When you’re trying to build up your savings it can be very tempting to opt for the minimum level of cover.
However, it’s important to consider how much your family will need if you were no longer around to provide for them. While you’re in good health and your earning capacity is stable you may take for granted what you actually provide for your family, but how prepared would you and your family be if you suffered an unexpected illness, trauma or even worse, death?
Think about this, depending on your age and family circumstances, it is estimated that on average an Australian couple with children could need life insurance to the value of around 10 times their annual earnings simply to repay their debts and maintain current living standards.2
Caring for ourselves, our families and other loved ones is something we all strive for, so you need to consider how long your finances would last if the worst were to happen.
3. Insurance is a rip off
Some people believe paying the premiums for a benefit they won’t see isn’t worth it, but in the event you or your family do need to claim, it can give you peace of mind to know you’ve prepared for this type of eventuality.
According to LifeWise one in five families will be affected by the death of a parent or an accident or illness that leaves him or her unable to work.3
When managing the day to day expenses of the family budget, paying the premium may seem like a significant expense, but in the end it’s all going towards the protection of what is most important in life.
4. I’m single with no children – I don’t need it
Life insurance can be for anyone – not just for parents with kids and a mortgage. Even if you’re single, having life cover in place can be handy to help protect your lifestyle and help cover your debts.
For example, if you were to suffer a serious illness or you were to become permanently disabled, how would you manage your bills? Also, if you were to pass away, would there be enough money to cover your funeral and other debts that you may leave behind?
5. It’s too difficult to select the right cover for me
One of the things that stump many people about insurance is, simply not knowing where to start. You want to find the best level of cover for your needs, and at the right price. Where do you start? It helps to compare different products side by side to see what different providers can offer you.
This way, you can make an informed decision about your policy and ensure you’re getting cover for the things you really want. Using a comparison tool like Choosi is a great place to start!
- Deaths (AIHW), Authoritative Information and statistics to promote better Health and Wellbeing
- 3302.0 - Deaths, Australia, 2012, Australian Bureau of Statistics
- The Lifewise / Natsem Underinsurance Report [PDF], Lifewise
These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.