Insurance Mythbusters: "My sum assured need only cover my debt".

It's that time again! Time to bust (or confirm) some more myths!

When it comes time to set the sum assured (definition here) for their insurance policy, be it life cover, trauma or Total Permanent Disablement, people without advice tend to assume that as long as the sum assured covers their debt (mortgage, credit cards, car payments, medical expenses etc.) then that's enough.

For instance, someone with $200,000 left to pay on their mortgage and $20,000 left to pay on their car may decide that they only need to be insured for $220,000. After all, being insured for more means higher monthly premiums and why take on the extra cost for something that isn't necessary?

Except in most cases, it is necessary.

Make sure your insurance sum assured is calculated properly, with the aid of a qualified adviser or broker., not with the aid of an abacus!

A $220,000 debt most of the time will not be covered by a $220,000 payment, as there are other factors and expenses to consider. Legal fees, interest costs, the cost of a financial adviser, bank fees and taxes and more all may need to be taken into account. So to make sure you don't leave any debt behind to your beneficiaries, it is generally necessary for your sum assured to cover the sum total of your debt and then some. How much will depend on your unique circumstances, but if you're in doubt, ask a professional.

VERDICT: This one is definitely busted. Just calculating your sum assured to erase debt may leave more costs on yourself or your beneficiaries during stressful times when they can't afford it. Make sure that all potential costs are considered, taken into account, and if at all possible, leave yourself with room to play by expanding your sum assured as much as is possible and affordable.

Insurance MythBusters: "You have to be critically ill to claim on your Trauma Insurance"

I hope everyone out there had a fantastic Christmas and New Year. The weather was disappointingly a little iffy, but the spirit of the occasion endures beyond surface level things like that, so I hope you valued your time with family and friends.

Mythbusters is one of my favorite shows. Science, interesting facts, big explosions and old wives tales being put to the test. What's not to love? I brought it up in the office and asked our team what they thought the biggest myths are regarding insurance that are out there, and this one was among the first they mentioned (stay tuned for more!).

Busting insurance myths may not involve as many cool explosions, but they could result in an explosion of cash in your wallet!

A lot of people think that Trauma insurance cover means just that. 'Only for significant trauma'. Significant trauma as in, life threatening or critical ailments and conditions. Certainly these conditions are usually covered, but there are often far more that you can claim for that most people are completely unaware of.

Conditions such as deafness and procedures such as an angioplasty are mostly not critical conditions, and yet you can sometimes make a claim for them just as readily as the others. The actual conditions that you can claim for may differ depending on the insurance provider, but we've had many people we're connected to surprised when they've brought up a condition, and we ask them if they've claimed for it. One in particular had a cancerous mole removed from their arm. He didn't think much of it and during our annual review with them, he just brought it up to us in casual conversation. He was more than happy when we consulted and found it met the conditions on their policy for a claim they didn't even know he was entitled to!

So if you do have a Trauma Policy, take a close look at the policy wordings so that you'll know exactly what's covered and what's not (it can differ between insurers and between plans). OR, if the confusing technical language is a bit too much for you, good news. We have a user friendly, easy to understand brochures that can help. Just let us know and we can send you one out free of charge. If you have any other questions, let our expert admin staff know.

Conclusion: Squarely busted. There are literally all sorts of conditions and procedures that are not critical or life threatening that may be covered under your Trauma Insurance. So if you don't have a policy and this belief was holding you back, don't let it any longer. If you do have a policy, take a look at precisely what's covered. You might have a pleasant surprise in your future.