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Life Insurance - Hints & Tips

Don't just insure the highest income earner in your household.
Check what life insurance you have through your super. You can usually buy extra life insurance through your super fund cheaper than buying it yourself.
Decide how much cover you need.
Read the product disclosure statement (PDS) which describes the product, its benefits and any limitations as well as its fees and charges.
Once you know which cover and how much you need, shop around to compare costs with a number of insurers.
You have a duty of disclosure. To meet this you must answer all questions on the application form truthfully, paying particular attention to any medical conditions and whether you smoke, otherwise your insurer may decide not to pay a claim.
Check if your product is inflation-indexed so your cover keeps up with the cost of living.
Check any restrictions for age, dangerous jobs, part-time or casual work, and maternity leave.
 
DEATH COVER TIPS
 Death cover is what is commonly known as life insurance and provides a lump sum of money on death or being diagnosed with a terminal illness that will end in death within 12 months.

The purpose of death cover is to eliminate the financial hardship after the death of a Family member. Most people take out death cover to pay off their outstanding debts and to leave a lump sum of money to be invested to cover the future financial needs of the remaining family members.

Take the time to recall your health history, and share this information with your financial adviser when taking out death insurance. This history should also include your hobbies (eg hang gliding, rock climbing, deep sea diving etc) and sporting activities (eg rugby, hockey etc) as these may affect your cover as well. Life insurance companies perform a more thorough investigation before paying out a claim than they do when you start the policy so misinformation may only serve to jeopardize your claim amount.

Think carefully about how much cover you need: The main reason people buy life insurance is to take care of the financial needs of their family after they’re gone. This requires the amount covered by the policy to be sufficient to pay off existing debts while setting aside enough money to pay for their expenses until they can live independently. CANSTAR CANNEX has put together an easy to use needs analysis guide to help you organise some of the major things to consider. It’s a good idea to start thinking about this before you visit your financial advisor because you’ll have to answer these questions early in the quotation process.

Shop around for the best premiums: Life insurance is a fairly competitive marketplace, and much of the competition focuses on price. Make sure you receive quotes from several life insurance companies to ensure you’re getting the best value for your money.

Update your coverage as your circumstances change: Life has a habit of changing and sometimes these changes can be dramatic from one year to the next. These changes can have a significant impact on the level of cover you need so it is important to review and update your coverage when your circumstances change. These changes in circumstances may include getting married, buying a house or having a child and as you can imagine any of these things can happen in a short period of time. Review your net worth every few years and reconsider the prospects your survivors may face if you die.

Never buy a policy you do not understand: If you are given illustrations or booklets, save that material with your policy. If your agent or company cannot explain the policy terms to your satisfaction, shop elsewhere. Make sure you understand any guarantees in your policy) and the consequences if you choose to drop the policy at any time.




TOTAL & PERMANENT DISABILITY (TPD) COVER TIPS
TPD cover provides a lump sum payment if you are unable to work in your own or any other occupation again due to an accident or sickness.

The purpose to TPD cover is to eliminate the financial hardship you may experience after becoming totally and permanently disabled. TPD insurance pays off existing debts (such as an outstanding mortgage) and leaves a lump sum to be invested to replace income and provide financial assistance to ensure your care needs are taken and those of your family are met.

Make sure cover is for both Accident & Sickness: no one knows what the future has in store for them so it is best to protect against as many events as possible.

Always apply for cover for your own occupation: This may seem pretty straight forward but there is a difference between cover for your own occupation and any occupation. Under the definition of “own occupation”, when making a claim, your ability to work is assessed only against your current occupation rather than any other occupations that you may be able to be retrained to perform.

Make sure your policy is Guaranteed Renewable: This ensures that once you and your insurer have agreed to the terms of the policy, these terms cannot be changed or cancelled by the insurer without your consent.


TRAUMA COVER
Trauma Cover is insurance cover against a defined illness (such as stroke, cancer or heart attack) or accident. Trauma cover provides a lump sum payment to assist you if an insured event occurs. Trauma cover is paid out after the diagnosis of an insured event regardless of whether you can continue to work or not.

The purpose of trauma cover is to eliminate the financial hardship usually experienced after a traumatic event and helps to cover some of the associated costs such as pays debts which include medical costs or time off work as well as setting aside lump sum to be invested to cover any lifestyle changes necessary (eg putting in a wheelchair ramp at home or paying for a carer etc).

Make sure the basics are covered: The majority of trauma claims paid are for heart conditions, major surgery, cancer, stroke. This highlights the importance of making sure that these events are included as standard in your trauma insurance policy.

Evaluate your individual Risks: Outside of the basics, your occupation or family history may increase your risk of certain events so it is important to take a close look at these risks and make sure they are included in your policy.

Make sure you understand what you’re covered for: Definitions for events may vary from one insurer to the next so it is important to make sure that you get a clear explanation of what events you’re being covered for before buying trauma insurance.

Consider and understand Trauma Reinstatement Option: This option allows you to have the trauma cover reinstated after you make a claim. There will be some exclusions on what events you’re covered for after you make a claim but at least you’ll still have some cover and you may be able to reinstate many times if you happen to have multiple events in your lifetime.




INCOME PROTECTION COVER TIPS
Income Protection cover provides a regular payment, generally monthly, to replace a percentage (75%) of your income in the event that you are unable to work due to accident or illness.

The purpose of income protection cover is to eliminate the financial hardship of lost income by replacing some of your income if you are unable to work due to accident or illness.

Declare all income components, not just your salary: Many people receive benefits such as regular overtime payments and other fringe benefits such as a car allowance which can sometimes be taken for granted and excluded when declaring your income. Think carefully about all your income sources to make sure that there aren’t any unexpected gaps in your income stream if you need to make a claim.

Check the waiting period before income protection benefits kick in: Income protection policies have a period for which you must be unable to work before the benefits start. The longer this waiting period is, the lower the premiums are but you must consider whether you will be able to survive that period without an income.

Consider and understand increasing Claim Benefit: This simply means that your payments are indexed to the inflation rates and will increase with the general increase in the in cost of living.

Always apply for cover for your own occupation: This may seem pretty straight forward but there is a difference between cover for your own occupation and any occupation. Under the definition of “own occupation”, when making a claim, your ability to work is assessed only against your current occupation rather than any other occupations that you may be able to be retrained to perform.

Watch out for the Offset Clauses: An offset clause allows the insurer to reduce the payout they pay if you receive payments from your employer or Centrelink so check to see what these clauses are.

Holiday home insurance hints

Consumers who own holiday homes should not forget that their second property needs protection just as much as their regular house, according to the AA.

Public relations manager at the financial services provider Ian Crowder states that "inertia and apathy" could well be responsible for lots of people not ensuring that such structures are protected.

"It's one of these things where people take out insurance and then, when the renewal comes in, they put it behind the clock on the mantelpiece and forget about it," he adds.

However, he notes that consumers should ensure they have sufficient home insurance cover for everything in their second property, including furnishings such as curtains and carpets, even though there may not be as many possessions in a second home as in the one which is used most of the time.

Mr Crowder's comments follow the publication of figures from Zurich Private Clients which suggested that one in ten people do not have holiday home insurance.

Financial ruin for one third of unemployed

Financial ruin for one third of unemployed

Record fine for A&L for mis-selling PPI

The Financial Services Authority (FSA) has given Alliance & Leicester (A&L) a record fine of £7 million for mis-selling payment protection insurance (PPI).

The FSA found that the bank had trained its staff to put pressure on customers who questioned the inclusion of optional PPI in a loan.

During the period January 2005 to December 2007, A&L sold around 210,000 PPI policies to customers looking for a personal loan with each policy averaging £1,265.

PPI policies cover monthly payments for goods, services or loans during illness and redundancy and have been the result of bad press lately after a recent report revealed that 2 million customers have been sold potentially worthless PPI.

According to many experts, the policies are said to be mired in small print and are very difficult for customers to make a claim.

A&L, which is the eighteenth company fined for mis-selling PPI, would have faced a much heftier fine but agreed to settle at an early stage of the FSA’s investigation. Previously, the largest fine was £1 million given to HFC Bank, a subsidiary of HSBC.

According to Margaret Cole of the FSA, the mis-selling at A&L are the most serious it have found and is reflected in the record fine.

Meanwhile, David Bennett, group chief executive of A&L, has apologised for its ‘shortcomings’ and said it would reimburse people.

Peter Vicary-Smith, chief executive of consumer group Which?, advises anyone who has a personal loan or credit card to check whether they have a PPI policy and should consider making a complaint if they think it was mis-sold to them.

The Competition Commission recently found insurers were overcharging their PPI customers by £1.4 billion a year.