Before you die, take a look at your life insurance policy
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Before you die, take a look at your life insurance policy

Unfortunately, sometimes in life things go wrong, often without warning. We're not 10-foot tall and bullet proof. So if something was to happen to you and you passed away unexpectedly, have you got insurance arrangements in place to make sure your family is financially secure?

Life insurance is insurance that pays out in the event that you die before retirement age. Many people may have a life insurance policy or a death benefit attached to their superannuation.

Many Australians discover they are under-insured when a partner dies.

Many Australians discover they are under-insured when a partner dies. Credit: Rob Homer

Unfortunately however, underinsuring does occur. When Whitney Houston died she reportedly had only had $29,000 in her bank and her life insurance policy was only $312,000 which was not enough to cover her massive debts totalling approximately $4 million.

Some superannuation funds offer group insurance for individuals who belong to a particular association or employer. This is an important measure in helping to address underinsurance as it means there are multiple people on the one policy leading to lower premiums and less administration costs.

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There has however also been a lot of debate recently about the conduct of some life insurers in how they respond when people or families try to make a claim.

Heath Ledger had a life insurance policy covering death by accidental overdose. However, due to unfounded rumours that his death may not have been accidental, the insurer refused to pay his estate the full $10 million for which he was insured. The estate ultimately had to sue.

For all of these reasons, it's important therefore to make sure you weigh up some key points when considering life insurance to provide for your loved ones:

  • Think about your needs – what your family situation is (whether your spouse works, if you have dependent children); what your income is and the lifestyle your family is used to; any debts you have that need to be repaid.
  • Read the Product Disclosure Statement (the fine print) carefully to make sure you know what you are and are not covered for – that ECG you had as a child could exclude cover if you have a heart attack.
  • Don't simply choose the cheapest option – it may not cover you for what you need.
  • Make sure you are truthful when completing the application form – if you do not disclose something, even if you innocently forget, then the policy could be voided.
  • Keep a copy of any documents you complete, the Product Disclosure Statement and letters notifying you of any changes to the policy.
  • Ensure your listed beneficiary/ies are kept up-to-date.
  • Review your life insurance at any major life event, such as marriage, divorce and having children.

If you make a claim and it is rejected, you should contact the Superannuation Complaints Tribunal or obtain legal advice.

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Alison and Jillian Barrett are both principals at Maurice Blackburn Lawyers. The Queensland sisters are experienced lawyers and passionate social justice campaigners. Alison juggles motherhood, as well as heading up a major legal practice area. Younger sister Jillian also leads a team of lawyers and sports a double degree in Law and Journalism.

Alison and Jillian Barrett are both principals at Maurice Blackburn Lawyers. The Queensland sisters are experienced lawyers and passionate social justice campaigners. Alison juggles motherhood, as well as heading up a major legal practice area. Younger sister Jillian also leads a team of lawyers and sports a double degree in Law and Journalism.