If it’s your first time applying for life insurance, you may not know quite what to expect. How can I get life insurance? Will the process take a long time? Will medical tests be required? What information will I need to have on hand?
What factors affect how much I’ll end up paying for my cover? These are all fairly typical questions for Aussies who have never taken out life insurance before, but they’re easy to answer. The process of applying for life insurance is quite simple these days – even for first-timers.
Why do you need life insurance?
Life insurance can help to protect you, your partner and your children from financial hardship if you should pass away, become seriously ill or injured and can’t work.
It can help you and your loved ones meet financial obligations and pay bills like the mortgage, groceries, utilities, rent, transport and school fees. Life insurance is a kind of safety net for those unexpected calamities that life can throw at us.
Life insurance comes in three basic types. Life cover pays a set amount of money to your selected beneficiaries when you die. Total and Permanent Disability cover (TPD) pays a lump sum to help with living costs and rehab if you should become totally and permanently disabled. Trauma cover provides cover in the event that you’re diagnosed with a specified injury or illness.
How much cover do you need?
If you’ve decided that life insurance is something you’d like to look into, you’ll need to work out how much you need. There’s no single answer for this – it depends on your personal situation.
The important question to ask is: if you were to suddenly die or become disabled, how much money would your family have available to live on and to pay for any outstanding debts like credit car payments, home loans, school fees, etc?
You need to work out what your family would need if the worst were to happen, and check that against assets like shares, savings, superannuation, etc. It’s easy to underestimate the appropriate level of life insurance necessary to spare your family undue financial stress. Your lifestyle, the size of your debts and your number of dependants are just some of the factors you’ll have to weigh up in deciding on your level of cover. If you need help, an online Life Insurance Calculator can assist in crunching the numbers.
How to apply for a new policy
In Australia, there are three basic ways to buy life insurance: from insurance companies, from insurance brokers and financial advisers, and from your super fund. Whichever you choose, make sure you do your homework and compare policies based on the monetary level of the cover they provide and the value you get for your money.
Carefully check the policy’s terms, conditions, limitations and exclusions. You’ll find all this information in what is called the Product Disclosure Statement.
Shopping around for life insurance in Australia is easy. Once you’ve narrowed down your insurer choices to a short-list, have a look at all their websites, paying special attention to what they say about exclusions – especially pre-existing medical conditions. It’s then a simple matter of getting some online quotes.
What happens when you apply
Insurers will want to give you a risk assessment to determine the likelihood of your making a claim against your policy in the future. Each insurer will handle this process a little differently, but generally, you can expect to be asked questions relating to your age, occupation, residency, financial status, personal health history, family health history, recreational activities and overall lifestyle. Some insurers may require medicals and blood tests, but a great many these days do not.
It’s absolutely crucial to be completely honest about your personal details and medical history when applying for life insurance. The more accurate and thorough the information you provide, the better able the insurer will be to obtain an assessment outcome that correctly reflects your individual situation and needs.
If you’re not completely truthful when applying for life insurance, it can definitely come back to bite you if you have to make a claim – and could result in the cancellation of your policy.
Depending on the results of your assessment, a number of outcomes are possible. If the underwriter considers you to be too high-risk to insure because of lifestyle factors or medical conditions, you may be denied cover.
If you’re deemed insurable, you’ll be provided the requested cover based on your assessment at the agreed upon rates and will receive all essential information pertaining to your policy.
In some cases, there may be exclusions applied to your policy, often related to a high-risk sport or activity that you participate in regularly, or a particular medical condition you may already have.
It’s always worth checking if you get a discount for applying online or for having an existing policy of some other type (home, car, etc.) with the same insurer. There may be a discount for paying annually as opposed to monthly, weekly or fortnightly, too.
- It’s easy to apply for life insurance in Australia – and just as easy to compare insurers to make sure you’re getting the right policy for your needs
- Life insurance assessments are based on several factors including age, occupation, personal and family health history, financial status and overall lifestyle
- With many insurers, medicals and blood tests are not required to apply for life insurance
- When comparing life insurance options, make sure you understand the terms, conditions, limitations and exclusions that come with your cover