Questions to ask when choosing life insurance

If you are considering buying, renewing or switching insurance from 2020, check if the policy will cover you for claims associated with pandemics, such as COVID-19.

Some types of personal insurance include:

• Life insurance – In the event of your death, this cover can provide a lump sum to help keep your loved ones financially secure.
• Total and Permanent Disability – (known as “TPD”) insurance can provide a lump sum to assist with living expenses, debts and medical costs.
• Income Protection – If an illness or injury means you can't work, income protection can provide you with an income to help meet your living expenses.

ASIC’s MoneySmart website¹ says most super funds offer life insurance, with eligible members typically given default death cover, TPD and income protection cover automatically.

ASIC says there are benefits to getting life insurance through super. These include it often being cheaper, it is easy to manage, and there is usually the option to choose the amount to be covered for.

However, TPD insurance cover in super usually ends at age 65 and life cover usually ends at age 70. This is contrast to insurance outside of super where cover generally continues as long as you pay the premiums.

Also, people changing super funds, stopping contributions, or who have a super account that becomes inactive, may find their cover may end.

If you're a new super fund member aged under 25 or have an account balance less than $6,000, insurance will not be provided unless you:

• Write to your fund to request insurance through your super
• Work in a dangerous job – you can cancel this cover if you don't want it.

Life insurance needs should reflect personal circumstances, which may include whether a person is single, has a partner or a family.

Needs may be calculated by how much money would be lost if something happened and you lost your earning power. This may include savings, paid leave, shares, or superannuation. These amounts may be taken into account in determining how much you would then need in insurance.

Use our insurance needs calculator to help work out how much insurance you may need.

Key features, fees, commissions, benefits, risks and the complaints handling procedure for any policy are detailed in the product disclosure statement.

When checking what a policy covers, you may specifically want to ask:

• What is and isn’t covered, including definitions of medical conditions and pre-existing conditions and if it suits your individual needs
• The length of the waiting period
• Ongoing costs of the cover, such as whether the premiums will increase, and when.

The Australian Prudential Regulation Authority (APRA) publishes Life Insurance Claims and Disputes Statistics² that aims to make it easier to compare life insurers’ performance in handling claims and disputes.

The data is used in MoneySmart’s life insurance claims comparison tools to compare life insurers according to:

• The percentage of claims accepted
• The length of time taken to pay claims
• The number of disputes
• Policy cancellation rates.