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5 life insurance traps to avoid that can cost you

Published on November 20th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Not comparing rates

Making the mistake of choosing the first policy that sounds like it has a good rate can be a trap that can end up costing many policy owners. With thousands of policies to choose from on the life insurance market, it is vital that you compare rates and features that come with the various policies to ensure that you will be adequately covered. You can speak to an insurer or a broker who will be able to help you find a policy that will be suitable for your circumstances.

Looking at the price tag instead of its features

Just because a life insurance policy is expensive doesn’t mean that it is affordable. Even if you are planning to bag yourself the cheapest policy on the market, it will be a waste of your funds if you do not check the features. Life insurance is all about proving a secure financial future. According to Real Insurance Family Protection Survey, a quarter of Australians were not sure that the policy they have will adequately cover, while 38% had no insurance. Always keep in mind to compare the policies features.

Assuming you will be covered for everything

To avoid disappointment when it is time for you or your loved ones to make a claim on your policy, it is vital that you read the Product Disclosure Statement. This is a detailed part of your policy that lists what will be covered and the exclusions that can disqualify you from making a claim on your policy. Ensure that the policy has features and benefits that match your circumstances, especially if you have a pre-existing medical condition.

Delaying the process of getting a policy

The myth that life insurance is expensive and that it is something that can be put off for when you are older ends up costing many Australians later. According to research by AFA, 81% of Australians thought life insurance was pricey while 61% overestimated the cost. Waiting till you are much older to get a policy means you will attract higher premiums. Getting life insurance can give you access to a policy that has lower premiums because you are generally healthier.

Not considering the various policies

There is more than one type of life insurance policy that you can choose from such as life insurance, TDP, income protection, and trauma insurance. However, not looking into which policy will be suitable for you along with the coverage it offers you can cost you. You can consider slowly building your policies if you are looking for something that is affordable. For example, taking out a life insurance policy along with income protection can ensure that you and your loved ones are protected. It is vital that you put in the research to find a policy that will be suitable for you.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.

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