Common life insurance myths

Understanding more about life insurance could protect your assets and help pay off debts if you can no longer work or pass away.

There are many myths about life insurance, so here are some points that you might like to consider.

Myth One: Your life insurance only comes into effect if you pass away

Life insurance products are designed to help you and your family during what can be a difficult time.  Different life insurance products are designed to protect you from different events that can occur:

  • Life cover – pays a lump sum payment in the event of death or diagnosis of a terminal illness that can help repay debt and cover living costs.
  • Total and Permanent Disability (TPD) insurance– pays a lump sum in the event of total and permanent disablement resulting in being unable to work again. TPD insurance can provide a financial safety net to help you and your family, and pay for medical and rehabilitation costs.
  • Trauma (or critical illness) insurance- pays a lump sum for major illnesses (for example, cancer, heart attack or stroke) and can help support you and your family if you can no longer work.  
  • Income protection – pays some of your income if you're unable to work due to sickness or injury.

Myth Two: If you're healthy, you don't need life insurance

It's easy to think you don't need life insurance if you're fit and healthy. But if you are planning, or have recently experienced a big life change, such as buying a house, getting married or having a baby, you should consider what might happen if the unexpected were to occur and how you would maintain your family's lifestyle. It is also worthwhile to keep in mind that if you do experience health issues in the future this may make you ineligible for life insurance cover or attract higher premiums.

Myth Three: If you have private health cover, you don't need life insurance

Private health cover can be a big help if you need to go to hospital or encounter certain health care costs, but it doesn't provide cover for costs such as any rehabilitation you may require, or your mortgage repayments. TPD or income protection could assist in covering these additional expenses, and help preserve your family's financial situation, in the event of an accident or if you suffer a serious illness and are no longer able to work.

Myth Four: The built-in life insurance in your superannuation policy is all you need

Many super funds offer some life insurance for their members. It is important to find out what type of cover you have in your super fund and whether it will be enough to cover all your expenses. If you find you do not have enough cover, you could consider standalone life, income protection, TPD or trauma insurance to cover the gap.

Read about how income protection can benefit your financial future should the unexpected happen.

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Things you should know

Life Insurance provided by AIA Australia (Life Insurance) and Income Protection provided by AIA Australia (Income Protection), as described on this website, are provided and issued by AIA Australia Limited ABN 79 004 837 861, AFSL 230043 (AIA Australia) and distributed by the Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945 (CBA). AIA Australia is not part of the CBA Group. CBA and its related entities do not sell, issue or guarantee the obligations or performance of AIA Australia or the products it offers and these insurance products do not represent a deposit with or liability of either CBA or any of its related bodies corporate.

This information is current as at the date of this communication and may change. This information is general in nature and has been prepared without considering your objectives, financial situation or needs. You should, before acting on this, consider the appropriateness to your circumstances and read the relevant Product Disclosure Statement (PDS) before deciding to acquire or continue to hold any of these products. You can also call AIA Australia on 1800 491 588, 9am to 5pm, Monday to Friday (Sydney time) with any questions you may have about these products. Neither CBA nor any of its related bodies corporate are authorised representatives of AIA. For more information on the financial services CBA provides, you should read Financial Services Guide and Privacy Policy. If you purchase a Life Insurance and/or Income Protection policy, CBA is paid a commission which is a percentage of your premium.

AIA Australia has adopted the Life Insurance Code of Practice, which contains minimum standards of service that customers can expect from insurers. The code can be found at aia.com.au/en/about-aia/about-us/industry-standards.

AIA Australia has prepared a Target Market Determination which describes the class of consumers that comprise the target market for this product. The Target Market Determination can be sourced at www.aia.com.au/tmds