Today, we’re going to talk about a difficult topic. Death. While average life expectancy has almost doubled over the last 100 years, the rate of death remains the same – we get one each. So, death is something that we need to think about, and we need to plan for. It is never if. It’s when.
Exercise much, eat well, drink little and smoke nothing. If you do these four things, then you give yourself every chance of avoiding what is known as a ‘preventable death.’ As the name implies, a preventable death is one that could be avoided if different lifestyle choices had been made.
That said, many deaths are unpreventable. People develop illnesses such as motor neurone disease, for which we do not yet have a cure. Or they fall victim to a traumatic accident, such as a car crash.
Either way, deaths are often tragic. This is especially so if the person who dies is a financial provider for other people. It might be a parent, a partner, or even an adult childcaring for older relatives. But most of us have somebody else who depends on us providing for them financially.
If you’re one of those people, then you should seriously consider death cover. Death cover is a form of life insurance that pays a benefit to your loved ones or other nominated people if you die during the period of the policy. While there can be some waiting periods on certain types of death, typically the policy pays if the insured event occurs.
Here are six practical tips to ensure you make the most informed decisions regarding your life insurance policy.
1. Assess Your Coverage Needs Carefully
The amount of death cover you need depends on various factors such as your financial obligations, your dependents’ needs, and your lifestyle. Consider future expenses like your children’s education, mortgage payments, and any outstanding debts that would need to be settled. It’s vital to ensure your cover is adequate to support your loved ones in your absence without being overly burdensome in terms of premiums.
2. Understand the Policy Terms and Conditions
Policies can vary significantly in terms of what they cover and the conditions under which they pay out. Make sure you fully understand any exclusions, waiting periods, and the claims process. Being clear on these details can prevent misunderstandings and ensure your beneficiaries receive the benefits without unnecessary complications.
3. Compare Different Insurers and Policies
Just as with any significant financial decision, it’s wise to shop around and compare what’s available. Look at not just the premiums but also the benefits, customer service ratings, and the financial stability of the insurer. Sometimes, a slightly higher premium might offer substantial additional benefits that are worth the extra cost.
4. Be Transparent About Your Health and Lifestyle
When applying for death cover, honesty is paramount. Your insurer will ask questions about your health, lifestyle, and any risky activities you engage in. Being upfront and honest about your medical history, smoking status, and any dangerous hobbies is crucial. Failure to disclose relevant information can lead to a policy being voided, leaving your beneficiaries without support when they need it most. An accurate disclosure will ensure that the policy you are issued is based on a true understanding of your risk, helping to avoid disputes over claims in the future.
5. Review and Update Your Policy Regularly
Life changes such as marriage, the birth of a child, a new mortgage, or a change in your health status can all affect your life insurance needs. Make it a habit to review your policy regularly—at least every few years or after significant life events—to ensure it still meets your needs and adjust your coverage accordingly.
6. Opt for Early Life Insurance to Minimise Policy Exclusions
If you have death cover and you pass away, a benefit is usually paid. The only time a benefit would not be paid is if there is an ‘exclusion’ on your policy. Exclusions can be put on policies if the risk of you dying prematurely from a particular cause is known to be high at the time you take out the policy. For example, if you are being treated for cancer when you take out a policy, then cancer as a cause of death will almost certainly be excluded from your policy. This makes sense: no insurer would agree to issue a policy when it is highly likely that a payment will need to be made. That is why insurers assess your situation when you first take a policy out.
As a result, it usually pays to take out death cover earlier in life. This is before illnesses have had the chance to make themselves known to you. Virtually all death cover is known as ‘guaranteed renewable.’ This means that if an insurer issues you a policy in one year, it is obliged to continue to renew the policy each year thereafter – even if your health starts to deteriorate after the policy commences. So, if you take out cover and then experience an illness such as cancer, the insurer cannot exclude cancer as a cause of death in future years.
This means that the state of your health when you first take out the cover is very important. If you are in good health, your premiums will be relatively low and there should be no exclusions on your policy. You can then continue with this insurance in future years, even if your health becomes compromised. Obviously, younger people tend to be in better health – which is why commencing death cover while you are young and relatively healthy is a good move.
Seek Personal Advice
Remember, the purpose of death cover is to provide peace of mind and financial security for you and your loved ones. Taking the time to carefully consider your options and make informed decisions can make all the difference in achieving that goal. So, if there are people who depend on your good health for their financial well-being, talk to us today. We can assist you to arrange an appropriate level of cover with a quality insurer.
