One problem with life insurance is its very name, which confuses some consumers, but perhaps like the misleading term "credit card", it’s a happy accident we have to live with.
Despite all the news about the capping and control of commissions around life insurance, which is a positive, there’s still a mountain of consumer misunderstanding and inertia to get over. Maybe better terminology might help. "Life insurance" is really "death insurance" in the same way that a "credit card" is really a "debt card". So why can’t we "call a spade a spade"?
Source: www.insurancetipsntricks.com/usa/life-insurance-companies-in-usa (a US site trying to explain terms around Life Insurance)
The clever framing of the credit card as something which brings us a positive, such as credit, as opposed to a more negative state, such as debt, has proved a winning ploy. Likewise "life cover", as opposed to "total and permanent disability insurance" and "income protection insurance", arguably doesn’t focus enough on "death" (which is the hurdle the policy holder must vault to secure a payout).
Perhaps a few plain words about being killed and pictures of gravestones, as opposed to smiling families having picnics, might help us get over our massive problem with underinsurance. If you have a hefty mortgage and a growing family, they might appreciate the thought you had put into getting "life cover" insurance, before going for that cycle ride. Only 4% of the total population with dependent children in Australia, have adequate life insurance cover (Source: www.Lifewise.org.au)
A different handy term might be "debt insurance" as surely the cover is more designed to address your dependent’s current and future needs, than to be a gamble on your dying.
I once heard an elderly lady complaining about how costly it was to insure the life of her husband in his seventies believing (naively but understandably) that the cover was designed to compensate her in some way for his death.
But maybe she was right - even if it proved ultimately unaffordable for her. Meanwhile, at the younger end of the spectrum, the government's removal of default life insurance cover for new members of super funds, who are under 25 years old, will likely cause this group (who can secure lower premiums by getting into life insurance at this earlier stage), to opt out of having life insurance.
By Christopher Zinn, Communications & Campaigns Director, Adviser Ratings