6 Objections to insurance

Car, home, contents and health insurance are often the most considered types of insurance, but how often do your clients consider life insurance, and what are some of their objections?

When a client considers insurance, they’re most likely to first think of car, home, contents and health insurance. Life insurance is an afterthought, and based on Rice Warner’s report, Underinsurance in Australia 2017, we continue to see Australians significantly underinsured[1].

In many cases, you may find clients have objections towards obtaining a life insurance policy, however while their concerns are legitimate, the reality may be a different story. Below we highlight 6 objections to insurance, and some useful pieces of information that can be used to combat these.

Often, pricing is a factor when a client is considering any purchase, including an insurance product. However, clients do have several options to help combat any pricing concerns, and once utilising these options they may find that the price is not as high as expected.

Essentially, what cost does your client place on themselves? How would they survive financially and mentally if they were to unexpectedly fall sick or injured? How would they supplement any possible loss of income, pay their mortgage or unexpected expenses?

AIA Australia (AIAA) understands that pricing is an important factor for clients, and that’s why we’ve implemented several options to help with affordability.

AIAA, offer several discounts from bundling policies together (which include our various Priority Protection and AIA Health insurance products), and AIA’s science backed health and wellness program, AIA Vitality.

Your clients may be eligible for the following discounts:

If AIA Vitality is attached to a Priority Protection policy, the initial discount will be applied to the premium (but not the policy fee) as follows:

• Lump sum – 17.5%*
• Income Protection (IP) / Business Expenses – 7.5%

*The 17.5% discount is only available for new applications which include an AIA Vitality membership. When a new AIA Vitality membership is added to an existing policy, only a 12.5% discounts applies.

If your client also takes out an AIA Health insurance policy with AIA Vitality in addition to a Priority Protection policy, they can receive an additional 5% discount on their Priority Protection Lump Sum, IP and Business Expenses premiums (not including the policy fee).

While many people have insurance inside superannuation, the Government’s recent passing of the Protecting Your Super (PYS) and the Putting Members’ Interest First (PMIF) bills, may have impacted how much insurance they still have within superannuation. Your clients should consider:

• How much insurance cover they have inside superannuation.
• IP premiums inside superannuation is not generally tax deductible.
• What limitations are in place for the release of funds for policies inside of superannuation?
• How quickly would your clients receive a monthly benefit if they submit a claim? It can sometimes take longer to receive monthly benefit payments as they first have to be approved by the Trustee.
• Is the waiting and benefit period on their IP adequate? IP benefits in super sometimes only lasts two years. Consider a separate IP policy with a waiting period of two years and a longer benefit period to extend their IP cover.
• What type of Total and Permanent Disablement cover (Own or Any) is your client eligible for?
• Insurance inside superannuation can erode their retirement savings.

While your clients may not have any dependants now or much in terms of debt, that’s not to say their circumstance won’t change in the future. Your client may find themselves starting a family sooner than expected, gaining promotions in their jobs leading to more disposable income and bigger debts.

Your clients may believe that they will receive help from the government in the event they are sick or injured for extended periods of time. While the government does provide some financial assistance, is the amount provided sufficient to support their needs? For example, the Disability Support Pension (DSP) for someone who is over 21, single and without dependants is $944.30 per fortnight[2]. 

The best thing about being young and healthy when applying for insurance cover is that premium rates are generally lower, with potentially less underwriting requirements. Also, the likelihood of having exclusions or premium loadings applied or being declined is much lower than that of someone older, since younger people tend to have less health issues. As your clients age their health is more likely to decline, which would increase the risk of having exclusions or premium loadings applied if they apply for insurance later in life.

Workers compensation is a form of insurance payments to employees, which covers their wages and medical expenses, however this is only available if your client has become sick or injured due to their work[3]. Furthermore, the rules around workers compensation differ from each state. For example, in NSW, there are two entitlement periods (0-13 weeks and 14-130 weeks), where after 130 weeks, your clients payments will cease unless:

• Your client has been assessed by the insurer as having no current work capacity, and is likely to continue indefinitely, or
• They’re working at least 15 hours per week and earning at least $196 (indexed annually), and that is likely to continue indefinitely, AND
• They completed an application for continued weekly payments after 130 weeks form and this has been confirmed by the insurer.

NOTE: after 260 weeks, payments will cease unless your client has been assessed as having an agreed permanent impairment of more than 20 per cent[4].

Private health insurance is a worthwhile consideration as it provides your clients with more options when it comes to medical options, such as being able to choose your doctor. Private health insurance can cover a lot of costs associated with choosing a private health option, however there is a still an out-of-pocket cost that your clients may be required to pay. In 2018, the Consumers Health Forum of Australia (CHF), completed a survey of 1,200 respondents. The survey found that more than a quarter of respondents’ out-of-pocket expenses for breast cancer had exceeded $10,000[5].

As previously mentioned, if your client also takes out an AIA Health insurance policy with AIA Vitality in addition to a Priority Protection policy, they can receive an additional 5% discount on their Priority Protection Lump Sum, IP and Business Expenses premiums (not including the policy fee).

With the above in mind, AIAA Priority Protection policies can help in your clients’ time of need. AIAA provides great product offerings, from Priority Protection (life, crisis, Total and Permanent Disablement (TPD) and IP cover), AIA Health Insurance and our science backed health and wellness offering, AIA Vitality. Bundling these together, allows your clients to meet a wide range of their insurance needs, while also obtaining greater discounts across their products – plus with AIA Vitality, gain rewards for reaching key health and fitness targets.

AIAA’s IP products can provide your clients with ongoing payments to supplement any loss of income. This will allow them to maintain their lifestyle, while seeking treatment and recovering. AIAA’s crisis and (TPD) products, along with AIAA’s Health Insurance product, can work together to cover the gap of paying for medical bills and medication not funded by the Pharmaceuticals Benefits Scheme (PBS), allowing your clients to explore their treatment options, while minimising their financial stress. Add to the mix the discounts offered when bundling all of AIAA’s products together and your clients can secure themselves and their families, and plan for tomorrow instead of worrying about today.

For more information on AIAA’s products, speak to your AIA Client Development Manager or Associate.

[1] https://www.ricewarner.com/life-insurance-adequacy/

[2] https://www.servicesaustralia.gov.au/individuals/services/centrelink/disability-support-pension/how-much-you-can-get/payment-rates

[3] https://www.fairwork.gov.au/leave/workers-compensation

[4] https://www.sira.nsw.gov.au/claiming-compensation/workers-compensation-claims/weekly-payments