The Association of Financial Advisers has warned consumers against cancelling life insurance following recent media reports on the industry.

CEO Brad Fox says there is a danger people will drop covers because they fear claims won’t be paid.

“It is vitally important Australians understand what life insurance they have, and the quality of the contract, before making any decision to cancel or vary it,” he said.

“If Australians do cancel their insurance, it could mean that if their health changes in the future they won’t be accepted for cover again.”

Mr Fox says last year $7.2 billion of life insurance claims were paid, benefitting about 100,000 families.

“This represents $20 million paid every day, with most of this coming from life insurance arranged through a financial adviser. At its best, life insurance is a real life-saver for families.”

Mr Fox says some recent stories concerning unpaid claims have involved group cover, where claims are normally handled by superannuation funds.

“Often these policies have been given weaker definitions to allow the price to be kept low for the super fund.”