One of the main reasons people purchase any type of insurance is peace of mind. And life insurance is no different.
While it is designed to help someone’s family after their death, it is often most helpful when the loved one is alive. For many, the thought of family and loved ones struggling to make ends meet is too much to bear, and life insurance can help allay these fears.
So what exactly is it? A life insurance policy provides a lump sum payment to you if you become terminally ill or to your family when you die. Some of the leading life insurance providers in Australia include MLC, hmmm, Allianz Y TO AMI.
It’s peace of mind knowing your bills will be covered and the people you care about won’t be financially disadvantaged, giving them one less thing to worry about during a stressful and harrowing time.
Most of us don’t like to think about death or terminal illness, but it’s important to make sure you’re adequately covered when you buy life insurance so you have the right policy for you and your family.
Before considering purchasing life insurance, the first step is to understand how it works. Life insurance covers death from any cause, although suicide is usually excluded for a certain period of time from the policy. A payment to the family will normally occur if the death is related to an event such as:
- natural causes
- medical complications
- acts of violence.
There are a number of different types of life insurance to suit your personal circumstances. The main ones include:
- Life coverage. Insurance that pays a lump sum to your designated party when you die. The cash payment to his family can be as high as $1 million, depending on his age. The general entry age requirements are 18 to 79 years old.
- Trauma coverage. It pays if you are diagnosed with a specific illness, such as a stroke, so you can focus on your recovery. This is sometimes called ‘critical illness’ or ‘recovery insurance’ and pays a lump sum if you are critically ill or seriously injured. This includes cancer, a heart condition, a major head injury, or a stroke. Trauma insurance does not cover mental health conditions. General entry age requirements 18 to 64 years.
- Total and permanent disability insurance (TPD). Provides payment to pay off debts and cover medical costs if you become permanently disabled. The lump sum also helps with rehabilitation and living costs. General entry age requirements 18 to 64 years.
- Income Protection Insurance: Generally, the payment for this insurance will be monthly, usually 85% of your bills. This type of insurance is contracted to cover expenses in case you need to be absent from work due to illness or accident.
- Funeral coverage: As the name suggests, funeral insurance is designed to help your loved ones pay the cost of your funeral in the event of your death.
There are a number of reasons people seek life insurance coverage.
Do you have relatives or dependents that you care for financially? Regardless of who your dependents are: children, spouse, or even the parents you support, life insurance is your guarantee that they’ll be covered financially, should something happen to you.
Are you a sole trader or main breadwinner? You may want to protect your business to ensure it survives. You can choose a company-owned life insurance policy with disability insurance that names the company as the beneficiary so you can continue if something happens to you.
Or, if you work in a high-risk area, you may want to consider disability insurance that continues to pay you a salary, in the event you are unable to work due to injury.
Did you know that you may already be covered through your retirement fund?
Before going any further, it is worth checking whether your pension fund already includes a life insurance option. To find out what insurance you have on your super fund and who the insurer is, you can call your super fund or access your super account online. See your superfund’s annual statement and product disclosure statement (PDS).
It is also important to ask yourself:
- What does the insurance cover you within super? Most retirement policies offer some life insurance products. These include life coverage (which pays a lump sum if you die) and total and permanent disability (TPD) insurance, which pays a lump sum if you become totally and permanently disabled due to illness or injury.
- How much is covered within super? This will really depend on how much you’re paying in premiums for coverage. You can usually find this information by reading your PDS statements. If you can’t find the information, call your retirement provider. The governments money smart site has useful information to guide you.
- Have you continued to update your Designated Payee? To make sure your benefactors get paid, it’s critical that you list the names of your benefactors on your policy. You will be required to complete a binding nomination form from your super provider, stating how you want some or all of your retirement death benefits to be distributed; this could be for your children or spouse. the nomination is generally valid for a maximum of three years and expires if not renewed. So it’s important to check with your superfund, otherwise you could risk others claiming the payment if you don’t keep it up to date. If you don’t have a binding nomination, your trustee will revert to a preferred nomination, which is non-binding. It will be used as a guide only by the Trustee of the Australian Retirement Trust when deciding whom to pay in the event of death.
In addition to looking at reviews and getting word-of-mouth recommendations, the following are worth considering when buying life insurance:
How much are the monthly premiums?
While most insist that life insurance isn’t as expensive as most people assume, at the end of the day you’re the one who has to be happy with the price. Make sure you know what your monthly premiums will be and whether or not they will increase in the future. It’s natural for them to increase as you age, but make sure you’re financially comfortable with these raises. People opt for “tiered premiums” that are recalculated annually (usually at a higher level) or “level premiums,” which are higher at first, but then price increases happen more slowly since they are not indexed to age .
What are Waiting Periods?
Like most forms of insurance, waiting periods apply to certain life insurance products, especially income protection. Check your policy to determine the waiting period for different types of life insurance and look for a policy with a low waiting time, as it can range from a few weeks to many months.
What are Exclusions?
All policies include exclusions of some kind, and life insurance generally does not cover suicide or any risky activity or behavior. Read the fine print carefully, as he may be surprised at what is included in these exclusion definitions.
How does the claims process work?
Life insurance claims can be long and stressful. This is where independent online reviews can come in handy, so be sure to look for companies that value good customer service and fast claims processing.
Any additional features?
Do you get a discount if you have multiple insurances with the company? Does it offer coverage of more than two million dollars? (Most exceed this range). Is the policy underwritten by an insurer you can trust? All of these additional features can be taken into account when deciding on the best life insurance policy for you.
Before you buy a life insurance plan, it’s important to shop around to make sure you get the coverage that suits your circumstances.
a runner could be a good place to start. Their job is to represent consumers in their search for the best coverage from several different insurance companies in exchange for a commission.
Or maybe you can go straight? If you have the time and patience, you can shop around and go directly to a life insurance provider. Now that you have a better understanding of the questions to ask and the tools at your disposal, you’re well positioned to find a policy that’s right for you.