Think you know life insurance? Think again.

These five facts - some little known and others commonly misunderstood - will shed a whole new light on life insurance. 

Whatever your goals in life, everyone wants to ensure their loved ones are looked after should the worst happen.

Most people think they understand life insurance – you pay the premiums and your insurer pays out a lump sum in the event of your death. But it’s a subject that's commonly misunderstood.

Here are five facts about life insurance that might surprise you:

You could get life insurance even if you have a pre-existing medical condition.

There is a myth that having a pre-existing medical condition automatically excludes you from buying life insurance altogether.

This is not true. You can take out life insurance, however your pre-existing condition may be excluded, or you may be required to pay a higher premium for your insurance cover. Different companies define pre-existing medical conditions in different ways, so it’s important to read any disclosures thoroughly and shop around if necessary, and remember that you have a legal obligation to disclose any pre-existing conditions to your insurer – otherwise you run the risk of your claim not being paid.

The life insurance cover that comes with your superannuation may not be adequate.

Did you know that more than 70% of Australian life insurance policies are held inside super1? This can be a tax-effective way to pay for life insurance as the cover can be paid for out of your pre-tax contributions rather than your take-home pay.

But the life cover bought by super funds is often based on averages and may not be tailored to your individual circumstances. Statistics also show that 95% of Australians have inadequate life cover2, so it’s important to review the life insurance provided through your super fund to ensure it's sufficient.

If not, you could consider buying additional cover – either inside or outside your super fund.

Life insurance can be tailored to suit your needs.

Just as with other types of insurance, life insurance is not one-size-fits-all. You can adjust your cover to reflect your changing circumstances – such as having children, buying a home or retirement – to ensure your cover remains suitable to your needs.

Doing this will also mean that you are never paying more in premiums than you need to.

You can alter your life insurance premiums.

Some people think that insurance premiums only go one way: up. But there are a number of ways to alter your premiums should you need to.

Firstly, your policy may have a feature that automatically increases your cover each year to keep up with the rising costs of living. This means, however, that you may pay higher premiums for the increased cover. If you don’t need this additional cover you can cancel your next automatic increase and your cover remains the same.

Your policy may also allow you to fix your premiums at their current level. If you choose this option you will retain your cover, but the amount of cover you have will decrease each year on your policy anniversary.

And if you make positive lifestyle changes that improve your health, you can request an insurance reassessment to see if you can decrease the cost of your cover.

You can also control your premiums by opting for longer waiting and benefit periods.

Renewals are guaranteed even if your circumstances change.

Once you've taken out life cover, it will automatically renew each year regardless of changes to your health until you either choose to cancel it or reach the maximum age under your policy.

But if you let your insurance lapse you will no longer be covered, and you may not be able to get the same level of cover again in the future, so a good strategy is to take out cover when you are young and healthy – and retain it.

How to find out more

Our insurance calculator can help you determine the level of cover you need, or for more help, contact your financial adviser. If you need help finding an adviser call us on 131 267 or use our find an adviser tool.


How much insurance do you need?

There are many factors that come into consideration. Our calculator can help you work out what type and how much cover you may require.

Find out now

Sign up to our newsletter

Want to keep up to date with the latest news, tips and insights? 

Subscribe now

Explore your goals

Try our online tool to explore, prioritise and create your own goals timeline.

Start exploring

Want to keep up to date with the latest news, tips and insights?

Sign up now

Recommended articles

Important information

Show more

© AMP Life Limited. It’s important to consider your particular circumstances and read the relevant product disclosure statement before deciding what’s right for you. This information hasn’t taken your circumstances into account.
This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.
Although the information in this article is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decisions. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.