Life Insurance

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Life is full of uncertainties that are beyond our control. However, with the right life insurance cover, you can be certain that your family will be alright should some grave circumstances (such as death, disability or illness) befall you or your family.

Types of Life Insurance

Before deciding on the type of life insurance you want to get, it’s important to decide on which cover suits you best. The following are different types of cover that you may need, of which in some circumstances, you could need more than one of these:

  • Life cover is paid out to the beneficiaries listed on your policy when you die. They receive a set amount of money
  • Total and permanent disability (TPD) cover is often included in life cover. It pays out a lump sum figure, which is supposed to assist in covering living costs and rehabilitation costs, if you are faced with total and permanent disability.
  • Trauma cover provides cover when you are diagnosed with certain illnesses and injuries, including those that cause major changes to your life.
  • Income protection compensates you for income you may have lost because of your inability to work resulting from injury and sickness.

Even after choosing your cover, it is critical to constantly review your cover in light of your needs, especially in the case of life changes.

Level of Insurance – How Much Insurance Do I Need?

This is a critical question that is best answered by assessing what you can afford and what you may need to prioritise, which may sometimes result in reaching a compromise between your wants and affordability.

The following are important aspects to consider:

  • How much money would your family need to have if you were to die or if you became a person with a permanent or temporary disability? Consider how much money you may have available, for example in shares, superannuation and savings.
  • How much money would your dependents need if the worst-case scenario came to pass? Consider costs such as childcare, education and any debts.

The difference between the amount of cash your family would have and the amount of cash that they would need can be a helpful indicator of the amount of cover you could get.

Before beginning the work of making comparisons between different life policies, it is worth exploring the possibility that you may already have some cover through your Super fund.

It is important to constantly review your cover as you experience lifestyle or income changes, because you may need to adjust your level of cover accordingly. Some lifestyle changes such as having children may require an increase in your cover, whilst other changes like completely paying off your mortgage may allow you to reduce your cover. 

Switching life insurance cover

The decision to switch your cover should not be based solely on the difference in the premium. The following factors should also be considered:

  • Level of cover – will the level of cover that you will receive remain the same and will it cover your needs? For example, will your new insurer cover pre-existing conditions that your current insurer covers?
  • Waiting periods – will your new insurer apply certain waiting periods for different types of benefits?

Further guidance on choosing an insurance cover that meets your needs can be provided by licensed financial advisers.

Insurance calculators

To help you calculate the amount of cover that you need, you may access insurance calculators online. Since there are a number of calculators to pick from, some of which have very detailed questions, you may find it helpful to try out different ones and gather a number of recommendations that best suit your circumstances.

Stepped and Level Premiums – What Are They?

As you age, your likelihood to make a claim increases and so do insurance premiums.

In the case of life cover, total and permanent disability cover, or trauma cover, it is possible for you to choose either stepped or level premiums.

The difference between stepped and level premiums:

  • Stepped premiums – as you get older, your insurance premium may be cheaper in the beginning, but increases year by year. Before selecting this option, it is recommended that you assess whether you can afford the premiums or not. It is advised that you carefully consider what the premiums may be over the next 5 years, or for the duration that you intend to hold the premium.
  • Level premiums – age is not a major factor for level premiums. However, level premiums are generally known to be pricier than a stepped premium in the beginning and may increase over time due to changes to insurer’s fees or adjustments to inflation.

Level premiums may be ideal for you if your goal is to control your costs over time. Despite being higher in the beginning, they end up being much cheaper than stepped premiums when you are older. Thus level premiums turn out to be cheaper if you are hoping to hold the insurance for a longer period of time.

Contact us to discuss for a tailored solution to protect you and your family!

Wealthness Pty Ltd ABN 13 231 248 112  [t/a Better Financial Planning Australia]  is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL No. 236523. It is important to be aware that Better Financial Planning Australia is not authorised by Infocus to provide advice relating to credit services or property advice. Infocus is not responsible for any advice outside of the scope of this authorisation and should you wish to act on any of this general information, please first seek professional financial advice.

Wealthness Pty Ltd t/as Better Financial Planning Australia will endeavour to update the website as needed. However, information can change without notice and Wealthness Pty Ltd t/as Better Financial Planning Australia does not guarantee the accuracy of information on the website, including information provided by third parties, at any time.

This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Wealthness Pty Ltd t/as Better Financial Planning Australia does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, Wealthness Pty Ltd t/as Better Financial Planning Australia and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.

Wealthness Pty Ltd (ACN 613 313 250) [t/a Better Financial Planning Australia] Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL Licence No. 236523. Source: Adviser Ratings

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