(-20%) Term Life Insurance
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Term Life Insurance is the cheapest and most basic life insurance product in Australia. Term Life Insurance provides a lump sum payment to your spouse/dependants and/or estate to pay out debts and help your loved ones continue with a similar lifestyle if you were to suffer premature death or be diagnosed with a terminal illness with less than 12 months to live.
Term Life Insurance Cover is one of the simplest forms of life insurance to understand because it’s just like any regular insurance such as car or home and contents. Once your premium lapses you can choose to renew or simply cancel the policy. If your premium is not current, you are not covered for any death benefits.
Who can take out Term Life Insurance?
You must be an Australian resident and be between certain ages to take term life insurance. Depending on the company minimum age is usually 15-18 and maximum age is 60-75.
Contrary to UK or USA where term life insurance is bought for a certain term (10, 20, 30 years), in Australia - as long as you paying your premiums - term life insurance cover can continue until the cover expiry date which is usually 99 years. However you can choose to stop paying your premiums at any stage and therefore forfeit any future benefits in the event of your death.
Term life insurance in Australia doesn't have an investment component and thus if you stop paying your premiums you will not receive any investment return or refund from the insurer. This type of insurance is particularly good for those on a budget who wish to be covered for life insurance, and be eligible for high benefits, during certain times of their life, but don’t necessarily want ongoing coverage beyond that.
How much Term Life Insurance Cover you can apply for?
Usually the minimum amount of cover you can apply for is $100,000. Some companies have $50,000 as a starting amount. You can increase your cover by any increments you wish, usually $1,000 up to a maximum of $10,000,000
Please consider the amount carefully. Term Life Insurance should cover your debts and provide your family with the funds to to meet their future financial needs if you were to die. Too little or too much cover is waste of money. General rule of thumb is you should get covered for 10 times your annual income plus current debts.
When should you consider Term Life Insurance?
Term Life Insurance becomes important when you have dependents or debts. So events like these should prompt consideration for term life insurance cover:
- Getting married
- Having children
- Buying property or any other asset involving debt
- Starting your own business
- Setting up a Self Managed Super Fund
- Putting together a Financial Plan
When a Term Life Insurance claim will not be payable?
Usually a term life insurance claim will not be payable if death or terminal illness is directly or indirectly caused, or contributed to, by:
- suicide, or an intentional self inflicted act within 13 months of the Cover start date;
- criminal act by the insured person;
- alcohol abuse or alcohol dependence;
- improper use of prescription drugs, over-the-counter
- drugs, and controlled substances; or
- a pre-existing condition.
Guaranteed Renewable Cover
When you start paying your premiums and you continue to pay your premiums when due, your Term Life Insurance policy is guaranteed renewable until Cover ends (usually 99). This means that the insurance company cannot cancel or alter the terms of the Cover because of changes in your health, occupation or pastimes.
This is a very important condition and this is why you should insure yourself early enough and when you are still healthy and fit.
Cooling off period
All companies provide cooling off period for your term life insurance. When you are accepted for Cover, you have 21-30 days from the date that Cover starts to check that the Cover meets your needs. This is known as the cooling off period. As long as you do not make a claim during this period you can cancel the Cover during the cooling off period and companies will refund any premiums you have paid. Your request to cancel must be in writing.
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