One of the main reasons people buy insurance of any kind is peace of mind. And life insurance is no different.
Although it is designed to help someone’s family after death, it is often very helpful while the loved one is alive. For many, the thought of their family and loved ones struggling to make ends meet is difficult to bear, and life insurance can help alleviate this fear.
So what exactly is it? Life insurance provides you with a large sum of money in the event of a serious illness, or for your family in the event of your death. Some of the life insurance providers in Australia include MLC, AHM, Allianz and AAMI.
It’s peace of mind knowing that the bills will be paid and your loved ones won’t be in financial need, giving them one less thing to worry about during this chaotic and painful time.
Most of us don’t like to think about death or terminal illness, but it’s important to make sure you have adequate coverage when you take out life insurance so that you have the right policy for you and your family.
Before you decide to buy life insurance, the first thing you need to do is understand how it works. Life insurance covers death from any cause, although suicide is usually not covered for the specified period of the policy. Family payments are often made if the death is related to circumstances such as:
- an accident
- natural causes
- medical complications
There are several types of life insurance to suit your life situation. Some of the main ones are:
- The covering of life. An insurance policy that pays you a large sum of money to a party of your choice in the event of your death. Cash payments to your family can be as high as $1 million, depending on your age. All entry age requirements are 18 to 79 years.
- A cover of horrors. It pays if you’ve been diagnosed with a medical condition such as a stroke, so you can focus on your recovery. This is sometimes called ‘critical illness’ or ‘recovery insurance’ and pays more if you are seriously ill or seriously injured. These include cancer, heart disease, severe head injury or stroke. Trauma insurance does not cover mental illness. Requirements for all entry ages 18 to 64.
- Total and disability insurance (TPD).. They provide payments to settle debts, and pay medical expenses if you become disabled. The fund also helps with renovations and living expenses.
- Financial protection insurance: Usually, the insurance premium is monthly, usually 85% of your loan amount. This type of insurance is taken to cover the amount you may need to retire due to illness or accident.
- Funeral veil: As the name suggests, funeral insurance is designed to help your loved ones pay for your funeral expenses in the event of your death.
There are several reasons why people need life insurance.
Do you have family members or dependents that you care for? Regardless of the dependents: children, spouse or parents you support, life insurance is a guarantee that they will be paid, if something happens to you.
Are you a sole trader or do you take advantage of food? You may want to protect your business from bankruptcy. You can choose a business life insurance policy with disability insurance that names the business as profitable to 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, should you find yourself unable to work due to an injury.
Did you know you can be paid early through your superannuation fund?
Before you proceed, it’s a good idea to check if your super fund already has life insurance. To find out what insurance you have in your super fund, and who the insurer is, you can call your super fund or access your super account online. Check your super fund’s annual statement and product disclosure statement (PDS).
It is also important to ask:
- What does Super Insurance pay for you? Most pension schemes offer limited life insurance. These include life cover (which pays the full amount if you die) and total disability (TPD) insurance, which pays you the full amount if you become disabled due to illness or injury.
- How are you paid within super? This will depend on how much you are paying for the cover. In most cases, you can find this information by reading your PDS statement. If you can’t find the information, call your agent. About the government Moneysmart website they have useful information to guide you.
- Have you continued to process your chosen benefits? In order to ensure that your beneficiaries receive payments it is important that you choose the names of your beneficiaries in your policy. You’ll also need to fill out a form to choose from your primary care provider, detailing how you want some or all of your death benefit to be distributed – this could be to your children or your partner. Selection is They are usually valid for three years and expire if not renewed. So it’s important to check with your superfund, otherwise you could be putting others at risk of having to refinance if you don’t replace it. If you don’t have a binding choice your trustee will revert to the choice you want, which is not binding. It will only be used as a guide by the Trustee of the Australian Retirement Trust in deciding who will pay out on your death.
In addition to looking at reviews and receiving word of mouth recommendations, it is good to consider the following when purchasing life insurance:
How much is the monthly payment?
Although many insist that life insurance is not as expensive as many people think, at the end of the day you are the one who should be happy with the cost. Make sure you know what your monthly payments will be and whether or not they will increase. It is natural that it will rise as you grow, but make sure that you are comfortable with the finances and this rise. People choose ‘premiums’ that are recalculated annually (usually at a higher rate) or ‘premiums’, which are higher to begin with, but then increase in value gradually because they are not written to age.
What Are the Waiting Times?
Like most types of insurance, waiting periods also apply to other insurance products, especially income protection. Check your policy to find out the waiting period for different types of life insurance and buy a policy with the shortest waiting period, as it can range from a few weeks to several months.
What are the Differences?
All policies have exclusions of some kind and life insurance generally does not cover suicide or any other catastrophic event or behavior. Read the fine print carefully, as you may be surprised at what is contained within these exclusionary definitions.
How Does the Complaints Process Work?
Life insurance claims can be long and stressful. This is where independent online reviews can be very helpful, so make sure you’re looking for companies that prioritize good customer service and resolving complaints quickly.
Other Other Things?
Do you get a discount if you have multiple insurance policies with a company? Does it offer more than two million dollars? (Many live above this). Is the policy underwritten by an insurer you can trust? All these extras can be considered when choosing the best insurance for you.
Before buying a life insurance plan it is important to shop around to make sure you get the right cover for your situation.
The seller may be a good place to start. Their job is to represent consumers in their search for the best service from several different insurance companies in exchange for services.
Or you can go directly? If you have the time and patience, you can shop around on your own and go directly to a life insurance provider. Now that you have a good understanding of the questions to ask and the tools you have, you are well placed to find a plan that fits your needs.