Life insurance is a topic we neglect, which tends to mean our understanding of it might be a bit patchy. To set the record straight, here are some responses to common misconceptions.
Only the main income earner needs life insurance
Life insurance isn’t just for the main income earner of the household. Although your level of required cover might vary, if you’re earning money that you and your family depend on, you should consider life insurance. If you’re a stay at home parent you should also consider it, if something happened how would your partner look after the kids, how would they pay for this? If you pass away or suddenly can’t work due to injury, illness or redundancy, life insurance can help cover your costs.
If two or more people in your family already have life insurance, it’s worth checking your policies regularly to make sure you know the answers to these questions:
- Do your policies overlap?
- Are you overinsured or underinsured?
- Has anything (like your salary) changed recently?
Life insurance is pricey
If your budget is already pushed to the limit, being hesitant about adding another cost is understandable. Fortunately, since you can choose how much life insurance cover you want, you determine the level of premium you can afford. Have a look at examples of what people pay in this Guide to Life & Living Insurance, or calculate your own premiums.
But I’m an invincible young adult
Being young doesn’t make you invincible. Accidents, illness and redundancy can befall people of any age, and supporting yourself if you can’t work isn’t easy – that’s where life insurance can help. On a positive note, you may require less cover when you’re younger, which means cheaper premiums.
It’s hard to get a payout even if you have life insurance
To avoid any claim issues, make sure you:
- are upfront about your health when you first set up your policy
- review the fine print to understand the terms & restrictions of the policy – before you sign, seek a second opinion if needed
- check your policy if any circumstances (e.g. your salary) change.
If you make a claim, get the info your insurance provider needs (medical or redundancy info, or a death certificate) to them as soon as possible.
Don’t just take our word for it – shop around
You’re going to have more questions. Talk to a professional – in fact, talk to more than one if you want to weigh up the opinions of different providers. Since life insurance is about having a financial parachute for both you and your family, it’s important to talk it over with them too.
‘I’ll do it later’ might be too late
Life insurance is one of those I-should-really-sort-that-out-one-day things that lives near the bottom of your big to-do list. The problem is if something happens to you, the other things on that list may no longer be possible. Given the importance of your family’s financial security, you should promote life insurance further up that list. Preferably to the top.
Information contained in this article is correct at the date of publishing and is intended as general information only. This article does not take into account your current financial situation, and goals and is not personal advice.
Richard Allardice is a writer and former professional explainer (school teacher) working at Springload. He’s been involved with banks his whole life, because that’s where he keeps his cash. Read more of his work.