Life Insurance provides a lump sum to your family in the event of death or terminal illness of the life insured.
With so many types of life insurance on the market, how can you be sure that your insurance policy covers everything that you need it to? Quite often, it seems that the differences between insurance policies are minute, leaving you confused over which policy is right for you and your loved ones. However, to ensure you get the right level of protection, you need to carefully consider your needs in order to guarantee that your policy is a perfect match for the life you live and the family you love.
What factors should influence the insurance policy I choose?
Good question. When it comes to choosing the right insurance policy, almost every aspect of your financial life should be taken into account. How old are you? And of what gender? How much do you earn? Are you married? If you have kids, how many? And how old are they? Do you smoke? Do you have a mortgage, or any other debts to pay off? What is the track record of your family’s health? These are just some of the questions you should take into account when deciding upon an insurance policy. The wide range of factors which can influence your policy means that no two people need be insured in the same way, as policies can be tailored to fit your needs perfectly. As a very, very rough guide, many life insurance providers suggest that the total sum of your life insurance should be at least 10 times your yearly salary.
Please remember that, when applying for life insurance, you have a duty of disclosure to your potential insurer. This means that you are legally bound to reveal any information that could influence the policy you are given. Failure to do so could result in your policy being withdrawn without refunds, while the insurer may choose to pursue further legal action against you.
Should I choose a retail product or put it through my superannuation?
There are a number of things to consider, as both options have their benefits and drawbacks. If you choose to buy your life insurance through superannuation, the positives are that it is the cheaper option, and both your contributions and your benefits from a superannuation are subject to less tax than if you were to choose a retail product. However, on the downside, the protection offered by superannuation is often very limited when compared with that offered by retail products, and does not include trauma cover.
So, you may think that choosing a retail product as your life insurer is more appropriate for you and your family? Think carefully, for there are drawbacks to this too. Retail product premiums are usually higher than those of a superannuation, meaning that they are not accessible for all workers. Of course, there’s nothing to stop you against blending your cover through both superannuation and retail products for your life insurance, if that is how you feel you will get the best coverage.
If I think that a retail product is the right choice for me, where do I go next?
If you choose a retail product, your next step is to identify what type of cover you would like from this provider. There are a number of different types of insurance available to you, the most common of which are:
Income protection Insurance – this will be paid up to the age of 65 if you become disabled for a long period of time, to the extent that you are unable to continue working. You are usually guaranteed 75 per cent of your salary.
Term life insurance – this is usually valid up until the age of 99. Term life insurance guarantees the payment of a lump sum to your beneficiaries in the case of your death, or to you if you are diagnosed with a terminal illness.
Total and permanent disablement policy (TPD) – this cover can work independently of, or in conjunction with, term life insurance. TPD guarantees a lump sum payout if you become completely and irreversibly disabled or are unlikely to ever return to work.
Trauma insurance – trauma insurance guarantees a pay out from your insurance company if you suffer from any of the conditions listed in the policy. Often, trauma insurance is included in term life insurance, but the list of conditions upon which the insurer will pay out is usually limited. Separate, more expensive trauma insurance policies will cover a wider range of conditions, usually including stroke, heart attack or cancer.