Setting up your life insurance: 4 must-know tips
Life insurance is like that safety net you hope you never need but are glad to have when life throws a curveball. It’s all about giving you and your loved ones some peace of mind in the face of the unexpected. You might worry about whether your claim will pay out when you need it most. Good news: According to moneysmart.gov.au, 97.4% of life insurance claims purchased through a financial adviser are accepted.
Getting your life insurance set up correctly can make all the difference in a smooth claims process. Here are some practical tips to help you set up your life insurance policy for success, so you can feel confident and secure knowing you’re covered.
Get the right amount of cover
First up, look at your expenses and debts to figure out how much cover you or your family would need if something happened to you. Make sure you choose a benefit amount and life insurance that fit your needs and financial situation. You don't want to be underinsured or overinsured – balance is key.
Your savings, debts, income, and family situation all play a role in figuring out how much life insurance you need.
Here's a quick way to get a rough idea of how much coverage you need:
Add up your annual income and multiply by the number of years you want to provide for your family.
Add your total debts (like your mortgage, car loans, and credit card debt).
Add estimated costs for your kids' education.
Consider your savings and any other life insurance you already have.
This will give you a ballpark figure to discuss with your financial adviser, who can help you fine-tune it to fit your exact needs.
Know your policy inside out
Having a detailed chat with your adviser when you take out life insurance is crucial. Your adviser can help you understand the ins and outs of your policy, any exclusions, what the claims process looks like, and make sure you’re comfortable with your cover and inclusions.
Be honest and thorough
When applying for life insurance, honesty is the best policy. Provide accurate information about your health, lifestyle, and medical history during the application process. Transparency helps avoid roadblocks down the line. Not disclosing relevant details could result in your policy being cancelled from the start and a claim not being paid later on.
Keep your paperwork organised
In the event of your passing, your loved ones will need to file a life insurance claim to receive the benefits you’ve set up for them. To make the process smooth and avoid delays, keep copies of your policy documents, premium payment receipts, and any correspondence with your insurer in a safe, easily accessible place. Make sure your beneficiaries know where to find these documents.
Your financial adviser can help tailor your cover to your needs and ensure you understand exactly what you’re insured for, so you can feel confident that you and your loved ones are financially protected.