One of the more serious conversations every Australian will need to approach is talking about what happens to our families when we pass away. This topic can be extremely confronting because:
This is where life insurance enters the conversation.
Typically, life insurance is an agreement that if you die, or are diagnosed with a terminal illness, a sum of money will be paid out to (typically) your spouse or children. You can also have this death benefit paid to other members in your family (i.e. parents, siblings, etc).
At a terrible moment in time, life insurance can help you take care of the financial uncertainties your family will likely endure after you’re gone. Financial obligations such as mortgage repayments, everyday living expenses, funeral costs, children’s education fees, and debts should all be taken into consideration when discussing a suitable life insurance policy.
In 2016, more than 158,000 deaths were recorded in Australia, with coronary heart disease being the leading cause of death. These grim figures highlight our own mortality, and place emphasis on life insurance’s role if the worst were to happen.
Life insurance provides your dependants with the peace of mind to start future-proofing their lives should the unthinkable take place.
Generally, there are four different types of cover under the banner of life insurance. These options depend entirely on your circumstances and needs. Like most insurance policies, choosing a higher level of cover will cost you more, but usually offers a broader level of financial protection.
The main types of life insurance cover are:
Otherwise known as ‘death cover’, this level pays a set lump sum when you die. The sum of money goes to the people nominated as your beneficiaries on your policy.
This level of cover assists you by paying a lump sum in the case of serious injury, or permanent disablement. This sum is designed to support you with rehabilitation and living costs if you can no longer return to work. TPD insurance differs from insurer to insurer, and can be taken out in conjunction with a life insurance policy, or as an individual product.
Offers cover if you’re diagnosed with a terminal illness or injury, such as cancer, heart disease, stroke, and other life-threatening conditions. Also known as ‘critical illness cover’, trauma insurance pays a lump sum if you suffer a major medical incident (such as cancer and heart disease), and is ideal for Aussies who want to safeguard their health.
There are usually three types of income protection – standard income protection, mortgage protection insurance, and redundancy cover. These levels of cover safeguard your flow of income in the event of being unable to work due to illness or injury.
Depending on your type of cover, and the insurance provider, the average price of a life insurance premium varies. Similar to other kinds of insurance, your premiums are usually specific to your circumstances (i.e. age and health).
Important factors to consider when calculating the average cost of life insurance are:
Similar to other insurance policies, it’s very important to acknowledge and understand exclusions and restrictions on your level of cover. General exclusions are usually what insurers have in place for every type of life insurance cover. Many insurers employ default exclusions or restrictions which are cemented into their policies regardless of your medical history, financial circumstances, health, and wellbeing.
Some common general exclusions are:
Although most insurers will cover applicants for pre-existing conditions, high risk activities or jobs, and occupational hazards, some insurers may have them listed as specific exclusions on their policies. It’s imperative that you read the fine print of your policy’s product disclosure statement (PDS) to ensure you’re fully aware of your level of cover’s exclusions and restrictions.
If you have a pre-existing condition it is always best to disclose any information about your medical circumstances to your insurer. Some common pre-existing conditions may include asthma, depression, heart conditions, high cholesterol, and cancer. It’s important to be honest when disclosing any pre-existing conditions you have with your insurer, as it may disrupt or reject your policy during the claiming process.
Taking out a suitable policy is a big decision, so we’ve put together some helpful information to simplify life insurance.
It’s a fair question, because your life insurance can cost a lot of money over the years in premiums. With this in mind, we’ve assembled some thought-provoking reasons why you should get life insurance.
Cheaper life insurance is just one more reason (in a long list) to keep yourself healthy as you age. We explain how your life insurance is calculated, which will demonstrate exactly why your health impacts your premium.
If you crunch the numbers, you’ll see that it does work out to be reasonably cost effective to be insured. But, just how much cover can you get from your monthly premium?
Many Australians (roughly 70%) have life insurance cover through their superannuation fund. However, the level of cover in your superannuation may not be enough to cover the costs of your family’s needs.
