Daytime television is full of advertisements for life insurance policies that involve no medical questions and cost just a few dollars per day.
This has proven to be a popular option for many Australians, but how do these policies really stack up against traditional life insurance policies?
An Attractive Proposition
The companies marketing life insurance on daytime television have done quite a good job of promoting their products.
They have played on the fact that many Australians believe that life insurance is difficult to apply for and involves complex forms, blood tests and medical exams.
According to many of the advertisements you can apply for their company’s life insurance products with no medical exams, and in some cases without even answering any medical questions. They also advertise cheap daily premium rates.
On the surface these policies certainly do seem attractive. You can protect yourself and your family by taking out a life insurance policy that involves no medical questions and will cost less than a cup of coffee per day.
Sounds great, doesn’t it?
What’s The Catch?
The companies marketing over-the-phone life insurance are very good at pointing out the benefits, however there are some serious shortfalls with these insurance policies when compared to a proper life insurance policy.
The idea of no medical questions sounds great, but there is a massive catch behind this. Just because the insurance company does not ask about your medical history does not mean that your medical history is disregarded.
Life insurance policies that involve no medical questions will invariably have a clause which states that all existing medical conditions will be excluded from the policy.
What does this mean? It means that the insurer can and will deny any claim that relates to an existing medical condition that you had at the time of application.
Questions Can’t Be Avoided Forever
When you make a claim on your life insurance, would you rather that the life insurance company had asked questions about your health back when you took out the policy, or would you prefer that they ask your doctor and family these questions after your death?
No insurance company is going to pay your claim without doing a thorough investigation of your health and medical history.
If you choose to go through these questions at the time of applying for your insurance you will have ample opportunity to address the insurer’s concerns, and once they issue the policy you can rest assured that you are properly protected.
If you choose not to go through these questions and instead apply for an over-the-phone policy, the insurer is going to ask all of the same questions of your doctors and possibly your family members in the period following your death, before they pay your claim.
Should the insurer find that your death was caused by a medical condition you had at the time of applying for the insurance, no matter how minor you thought it was, the insurer will decline your claim.
Is It Worth The Risk?
Given the shortfalls with these television life insurance policies, it would be hard to say that it’s worth risking your family’s financial security just so that you can avoid answering some medical questions.
There is no doubt that having some form of life insurance is better than having no life insurance at all, and it is likely that many people will successfully claim on their cheap policies.
But is it really worth taking the risk? For the sake of answering some medical questions and perhaps paying a few dollars more per month, most professionals would agree that the added peace of mind that comes with a proper life insurance policy is well worth the effort.
About Shane MooreShane is a former financial adviser who has been in the finance and insurance industry for over a decade. Shane holds numerous industry qualifications and is a Senior Associate of the Australian and New Zealand Institute of Insurance and Finance.
