The benefits of life insurance
Against the backlash on poor claims experiences, the Association of Financial Advisers (AFA) is warning Australians that jumping to conclusions could be inadvertently costly and a livelihood liability.
"It is vitally important Australians understand what life insurance they have, and the quality of the contract before making any decision to cancel or vary it," said AFA chief executive, Brad Fox.
"If Australians cancel their insurance — it could mean that if their health changes in the future, they won't ever be accepted for cover again."
Life insurance is generally sourced in three different ways — group insurance through a super fund, through a financial advisor, or directly from an insurance provider and according to the AFA, this is equivalent to around $7.2 billion a year in claims paid out to around 100,000 Australian families.
For Australians sourcing their life insurance directly from insurance providers, there is a risk of inflated price to cover marketing costs. If your choice is group insurance, the associated risk is having to work directly with your super fund without the guarantee of talking directly with the insurance company.
By working directly with a financial advisor, Fox states that the process is simple and effective, with the advisor liaising with the insurer for you.
"Advised retail policies have the highest quality contracts, the highest claims pay out and are ironically often the cheapest," he said.
A whitepaper commissioned by the AFA in 2013 traced the claims experiences of Australians and showed that there was a significant gap between consumers perceptions of the claims process and the reality of the experience.
"Life insurance is a real life saver for families," said Fox.
"It provides the money that gives them to recover from serious accident and illnesses, and time to grieve and maintain financial dignity after a partner or parents' death."
AUTHOR
Hope William-Smith
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