New research from Gocompare.com suggests that when it comes to life, consumers find it very difficult to tell the difference between fact and fiction.
- 44% believe that life insurance policies do not pay out for suicide and 18 % believe e that if they die their credit card debts die with them
- 18 % believe that if they die their credit card debts die with them.
If you die owing money on your credit cards, your estate will have to repay your credit card debts before any assets can be passed on to your beneficiaries. As long as you have no assets such as a house, your credit card provider cannot pursue anyone else for your individual credit card debts.
- 44% believe that life insurance policies do not pay out for suicide
Whether a policy pays out in the case of suicide differs between insurers. Often suicide is covered after the policy has been in force for at least one year, but individual policies may vary.
- 44 % believe they should tell their life insurer if they start smoking
- 23 % think they should tell their life insurer if they put on a lot of weight
- 48 % believe they should tell their life insurer if they get a serious illness
- 44 % believe they should tell their life insurer if they take up a dangerous sport
- 23 % believe they should tell their life insurer if they change their occupation
All myths - when you take out life insurance the insurance company assesses your risk based on your health, lifestyle, occupation and whether you participate in any dangerous sports or pastimes at that time. The premium quoted by the insurer will reflect your circumstances at the time you apply for cover. As long as you answer all of the questions accurately and honestly during your application you do not need to inform the insurer of any unforeseen changes that may happen in the future. Changes to your lifestyle will not affect your premium or your chances of your beneficiaries making a successful claim.
But, dangerous sports may be excluded from the policy.
- 42 % think they should inform their life insurer if they give up smoking
Fact - some insurers are prepared to review and possibly lower your premium should you stop smoking. If they will not, and you have given up smoking for 12 months or more, you could consider shopping around for a new policy so that your premium can be calculated as a non-smoker. Always make sure you have cover in place before cancelling your old policy.
19 % think they should tell their insurer if they lose lots of weight
Myth - but you should review your cover - your insurer will not reduce your premium but if you have lost lots of weight it may be a good time to review your cover. Your insurance company will have calculated your premium based on your circumstances at the time of your application so if you were dangerously overweight your premium may have been higher than normal to reflect the potential hazard to your health. If you lose a lot of weight and become healthier you may find that insurers are willing to offer you more favourable terms on a new policy, even if you are a little older, so shop around to make sure you get the best deal for the new, fitter you.
- 35% believe they should tell their insurer if they give up a dangerous sport
Myth - but you should review your cover - in most cases an insurer would need a new application to take account of your changed circumstances and is unlikely to reduce your premiums just because you tell them you have given up rock climbing.
Jeremy Cryer of Gocompare.com says, "Many consumers are pretty baffled about what affects their life insurance and what happens to their debts when they die. No one likes to think about what will happen when they die, but you owe it to those you leave behind to ensure they are not left in a financial mess when they are trying to pick up the pieces after your death."