Life insurance is one of those concepts we don’t really want to think about. For some people it seems like they’re betting against themselves! We don’t see it that way. Our philosophy regarding insurance is to have enough cover in place to ensure you will still be able to meet your goals, irrespective of what happens along the way. However, there are a lot of myths and rumours out there about insurance.
At Rothgard, we focus on four main types of insurance. These are:
• Life – Provides a lump sum to your family in the event of your death
• Total and permanent disability (TPD) – Provides a lump sum to you in the event you are totally and permanently disabled
• Trauma – Provides a lump sum if you suffer a specified trauma event (i.e. cancer, heart attack, stroke, etc.)
• Income protection – Provides regular income payments for the term of your ‘benefit period’ to replace your salary if you’re unable to work due to illness or injury
As we’re discussing these types of insurance, we get many questions from clients about whether they’ll be able to get cover. Some of these questions are below.
Don’t I have to be young to buy insurance?
This is a common misconception. We have clients in their 70s who would like to take out life insurance. While there is a maximum entry age for insurance, in Australia that can be up to 79 years of age. If you are interested in a particular policy, it’s important to review the Product Disclosure Statement (PDS) as this entry age is different for each insurer and type of insurance.
So, this allows you to buy insurance until your 70s. One thing to be aware of is most policies also include an ‘expiry age’. If you hold super in an industry super fund, it’s likely your life insurance will cease at 70 and your TPD cover will cease at 65-67. Depending on the reasons you held the life insurance will determine whether you need to continue holding it into your 70s. This is why it’s important to have the discussions with your adviser on a regular basis.
Do I have to lose weight to get insurance?
Weight and height are certainly two of the areas insurance companies review when deciding whether they’ll accept your insurance application. Generally this is done through Body Mass Index (BMI) to determine if you’re in the ‘normal’ weight range.
Statistically, people with a higher BMI tend to have additional health issues such as greater risk of type 2 diabetes, cardiovascular disease and hypertension. However, this won’t necessarily prevent you from successfully applying for life insurance. Insurers will also look beyond weight at other health indicators.
If after this review, they are still concerned, insurance companies have the option of providing you cover with a higher premium (a loading) or applying an exclusion. There would usually have to be additional medical issues for them to decline your application.
While losing weight specifically for the insurance medical exam would be excellent for your health, you may be asked whether you’ve lost more than 10 kilograms in the past year. If so, they only take a portion of this weight loss into consideration as they want to see you can maintain the lower weight. This means, losing the weight in a crash diet won’t necessarily give you a better outcome.
Can I get non-smoker rates if I’m only a social smoker?
Due to the health risks associated with smoking, smokers pay a higher premium for their insurance than non-smokers. There is a very basic answer to this question – No. To be classified as a non-smoker you must not have had any nicotine products (including cigars, chew tobacco or nicotine patches) for the past 12 months. The good news is that if you already hold insurance at smoker rates, you are able to apply for the reduction if you have avoided nicotine for 12 months.
Can I still get insurance if I’ve had mental health issues?
Nearly 1 in 5 people in Australia have been diagnosed as having mental health issues such as depression, anxiety or a mood (affective) disorder1. When assessing your insurance application, the company will consider the severity of the condition, when it occurred and if there was a trigger event. If you’re currently under treatment for mental health issues, this will also be taken into consideration.
It’s important to note that having mental health issues (either past or present) won’t necessarily stop you from getting insurance. If other issues were also present, the insurance company might choose to decline cover. However, many companies can choose to simply apply a mental health exclusion for the cover. Each company has their own policy, so it’s important you’re working with an adviser who understands your situation in order for you to get the best result.
It’s important you don’t lie to the insurer about any of these points (or any other!). If you lie about particular medical issues, the best case scenario is the insurer will discover it when they do the medical review and take it into consideration when they provide their offer of insurance (potentially with a loading or exclusion attached). A worse scenario is that this will lead to you being declined insurance. However, the worst case scenario is, at time of claim, the insurance company finds out you lied on the application, they cancel your policy and refuse to pay out the benefit.
If you have any questions about how insurance works and whether this is something you should be considering as part of your overall plan, please don’t hesitate to contact us.
This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
1. Australian Bureau of Statistics, National Health Survey: First Results, 2014-15, mental and behavioural conditions, http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by Subject/4364.0.55.001~2014-15~Main Features~Mental and behavioural conditions~32