About Best Life insurance
Nobody likes to think about themselves or their loved ones dying, but it’s something that you will need to prepare for one day. Naturally, you’ll want to leave something behind for your family, to help cover funeral costs and other expenses, and to support them after you’re gone.
Taking out life insurance is, therefore, the obvious choice- but unfortunately, selecting the right policy for your needs is anything but simple.
With so many different life insurance providers out there, each offering a multitude of policies, it’s easy to feel overwhelmed when looking at life insurance.
Terms like “level term insurance”, “index-linked” and “endowment policies” can be confusing to those without prior knowledge of life insurance.
Of course, you’ll want to make a fully informed choice when you take out a life insurance policy, and not just apply for the first one you come across. Fortunately for you, though, that’s where we come in.
In this article we’ve got all the info you’ll need on the various different types of policies from major insurance providers, to help you make the right choice for you and your family.
Whether you only want to take out a small life insurance policy to cover the cost of your funeral, or would rather put away a larger sum every month to leave behind to your loved ones, we’ll show you how to find the perfect policy.
We’re not linked with any life insurance provider, so you can trust us to provide informed, impartial advice and guidance whenever you come to us.
Whether you need help picking the right insurance provider for your own unique needs, or just want to translate those tricky insurance terms, we’ve got everything you could need to traverse the tricky world of life insurance.
Browse this article and you’ll find life insurance just got a whole lot simpler!
Everything You Need to Know About Life Insurance
You may have come across the term life insurance several times, but what exactly does life insurance mean? In simple words, life insurance is a contract to provide an income source for your family, children, and other dependents –when you are unable to do it.
When you take on a life insurance policy, you agree to make an agreement with an insurance company. The company agrees to make a round figure payment to heirs in the case of any unfortunate incident. It helps in meeting important financial commitments, including;
– Daily Living Expenses and Bills
– Rent, car, and mortgage payments
– Education expenses for your children
– Funeral costs
– Outstanding Debts
Life is a set path that comes with ups and downs. Although you don’t consider life insurance and avoid thinking of anything bad while being young and healthy, it’s smart to prepare for unforeseen and take steps to financially protect your family prior to any incident.
Isn’t the Super Fund well enough to Cover?
Being an Australian citizen, you might get super fund to some extent. However, it’s important to find out that you are getting rightly covered.
Do some research!
According to Australian law, super fund trustees must provide automatic insurance cover to their members. And premiums are usually deducted from your super contributions. What you have to find out is the cover type you have.
Most of the time, the level of coverage might not be exactly what you and your family need, however, it can be adjusted by consolidating your funds into one (in case you have more than one super fund). Consider having an eye on the investment performance, fees charges, and the type of insurance benefits available.
In case of a loss of super account, contact the Australian Taxation Office to help find your lost super. Mostly, the super fails to cover all the daily expenses in times of need.
Difficult times are inevitable in one’s life span. Dealing with serious illness, or loss of loved one is difficult in its own measures. And the added strain due to loss of income makes it worst. This is the reason why life insurance is important.
Here’s how life insurance relieves some of the pressure off your family during afflictions.
Why it’s Crucial Having the Right Kind of Life Insurance Policy
Any incident resulting in something bad happen to you or your loved one, life insurance can help your family by keeping them financially secure.
A standard Australian lifestyle needs up to $1 million or even more to stay financially stable in the current scenario. Yet latest figures show that the average Australian is extremely underinsured. Reports also suggest that the average life insurance covers less than two-thirds of basic everyday expenses. And, the average disability cover meets only a fraction of daily needs.
This is the reason you should understand and get the right life insurance that would be enough to keep things running after anything happen to you or your partner.
The need for life insurance persists in all stages of life. However, most people don’t think about having one until they start a family or have children.
Only if you’re single, debt-free, have no dependents relying on your income –then you probably don’t need a term life insurance in the first place. Albeit, there are some common risks one may face. Here’s a list of those and how to ensure besides them.
It’s not easy to think about unfortunate scenarios but they’re a part of life. Taking the time out to consider the risks involved and having a contingency plan is always advisable. And that’s where financial protection in the form of life insurance steps in.
Let’s take a look at the life insurance types to better understand what product you need to get the right life insurance policy.
Types of Life Insurance
The preferences in Life insurance products and types are commonly based on the owner’s particular needs. There are several types of life insurance. The most common ones are discussed below.
Term Life Insurance
This form of life insurance has been designed as a means of providing financial security for a fixed period. For example 5, 10 or 20 years. The amount that is paid for the premium payment remains the same for the coverage period selected.
Once that time period has passed, the insurance policy will usually require you to pay a higher rate as your premium payment. Term life insurance is generally considered as a less expensive variant of permanent life insurance.
The type of needs it helps to meet includes replacing lost potential income for the working year period. This also entails meeting long term family goals like college payments and keeping the business on the go.
Universal Life Insurance
This variant of life insurance provides financial protection throughout an individual’s lifetime. The policies involved are flexible, allowing you to increase or lower your premium and/or coverage amounts during your lifetime. Since it provides lifetime coverage however, it has higher premium payments than would a term life insurance.
The type of needs it helps to cover includes preserving the wealth that shall be transferred to the beneficiaries involved. Other than that, long term income replacement that extends beyond the working years can be gained. It also provides death coverage benefit while builds cash value.
Whole Life Insurance
This variant also works to provide lifetime coverage and usually has a higher premium payment than term life. The premium payments here are fixed. Other than that, there’s a savings component, giving it cash value.
The type of needs it helps to meet include its use as an estate planning tool to preserve the wealth that it is to be transferred to beneficiaries involved.
How much insurance do I need?
How to Determine Your Life Insurance Needs?
With the basics of life insurance cover, it’s time to get into the detail. What level of insurance do I need? Is a question commonly asked by many individuals. The answer lies in considering the amount necessary for securing your future.
It’s all about checking all the corners of any financial issues. Ask yourself and work your way through the different variants of life insurance available today and you’ll find the answer.
How far Term Life Insurance cover is necessary?
The best way to go about the situation is considering the type of debts you’d looking to pay off and the amount they total up to.
The next step to take into consideration is the amount you would consider to leave for your family to fulfil their future requirements, in the event of your death. After all, your debts won’t die with you.
A simple way to tackle this situation is to consider both your current and future financial requirements. Take this amount and subtract it from your existing resources, investments, earnings and any life insurance you may be possessing. The amount left should be a rough estimate of the Term Life Insurance you will require.
How much Income Protection Insurance is necessary?
Income Protection Insurance, also referred to as Salary Continuance Insurance isn’t the easiest thing to estimate. In fact, there’s no fixed set of rules to go about its calculation.
Keep in mind that this form of insurance is a cheaper addition to your Life Insurance and so can automatically be set to the same total. Putting that aside, don’t forget to consider the amount of insurance you may need to maintain a similar lifestyle, in the event of becoming disabled.
How much Trauma Insurance is necessary?
Trauma Insurance helps you put your life into perspective and think about any unfortunate circumstances you may be inflicted with. For example, it’s a great way to put your life on track in the event of a debilitating illness that has occurred suddenly.
There are a great number of policies that give you the authority to set your own levels of cover. And that’s why it’s valuable to think about how much you actually need.
How does life insurance work
Life insurance works similarly to the manner in which you ensure your home or car. The only major difference is that it protects your greatest asset, which is yourself.
How does Life Insurance do this?
Being the stakeholder involved, you are bound to pay your insurance company or provider a yearly or monthly premium. Then in the event of an unfortunate situation, your insurance company is liable to pay you out.
What are the different types of coverage involved?
There are four important subsets of life insurance. They include- Term Life Insurance, Income Protection Insurance, Total and Permanent Disability Insurance and Trauma Insurance. All these types work to provide you with a monthly amount or a lump sum in the event of an accident, illness or death. The type of coverage involved depends entirely on the type of life insurance you make use of.
What amount of premium do I pay?
Your premium amount does not solely depend upon one thing in particular. There are a number of factors to take into consideration. It includes your type of coverage, the place you purchased it from and the type of risk you are perceived to be by your insurance provider.
The good news for Australians is that most premiums, in general, are considered as affordable to the majority as a whole. To help you get an idea regarding premium amounts, we’ve set up two common examples.
1. A 35-year-old male, who is a non-smoker has applied for Life Insurance cover worth $500,000. He is liable to pay a premium of approximately $30 a month.
2. A 35-year-old female, who is a non-smoker has applied for Life Insurance cover worth $500,000. She is liable to pay a premium of approximately $25 a month.
Note: You can pay your premium on a monthly, quarterly, half yearly or yearly basis, depending on the flexibility of your budget.
What does a company assessing my risk mean?
Most insurance companies are subjected to associate a level of risk to their clients. This risk varies from individual to individual. Many insurance companies ask their customers a set of basic questions to assess your risk, whenever you apply for insurance.
An example of someone who is perceived to be at a low risk includes a young, healthy individual working at a low-risk occupation. On the other hand, someone who is older, unhealthy, a smoker and works at a high-risk occupation site such as a miner is bound to be at a higher risk level.
Do all insurance companies always assess risk?
No, not all insurance companies assess risk, otherwise known as underwriting. Those individuals who have access to their insurance via their employer, for example, may not be assessed for their relative level of risk.
The claims process explained
An insurance claim allows you to receive compensation after an injury, accident, loss of wages or when a death has occurred. In simple terms, it’s the event in time that allows your insurance policy to prove itself.
When it’s time to make a claim, the pressure and circumstances that surround you aren’t going to be too great. This is the reason insurance providers have the claims process ready to help make sure everything is quick and convenient.
There are additional services that are offered by your insurance providers such as rehabilitation services or counselling sessions, and they can be utilized when termed appropriate.
In certain places, a financial planning benefit is offered as well. This gives you the assistance you need to make sound judgments based on professional advice. It’s a great way to make the most of your claimed benefits, helping to secure your family’s future.
The Claims Process entails you to fill up a claim form. This includes detailed information regarding your existing condition, overall health, doctor’s reports and diagnosis. Medical proof such as lab reports, investigations, tests and medical certificates as well as an original copy of the insurance policy requirements should also be presented.
In the event of a death, the Life Insurance Policy can be claimed via submission of the death certificate. The process is summarized as follows:
1. The insurer or advisor is notified of the claim
2. The claim shall be assessed based on the circumstances and evidence you submit
3. A decision is then taken regarding your claim
4. Further information may be required. In such cases, your claims manager may feel the need to contact you
5. Certain claims such as income protection may require ongoing management. This is because they have a policy of paying a monthly benefit as opposed to a one-time lump sum.
What is underwriting
What does the term underwriting mean?
You may have come across the term underwriting while going through your insurance policy. Although not all insurance policies are underwritten, some are and that’s why you need to be aware and understand its meaning.
Many life insurance companies utilize the system of underwriting. This is the name given to a process that involves assessing your relative risk as well as analyzing whether your cost cover is proportional to the risks involved by. Those with the same or nearly the same level of risk are liable to pay the same or nearly the same premium costs.
Underwriting begins once your application has been submitted. The process of assessing your risk then commences by considering information from a number of different sources.
All underwritten policies require the stakeholder to fill up an application form as well as a medical/health questionnaire.
Does underwriting bring with it any benefits?
The underwriting process is proven to being beneficial. About 94% of applicants that make use of the underwriting process are most likely to avoid any form of difficulty. They also will usually end up paying only the standard life insurance premium rates.
What happens if you’re assessed as a high-risk level applicant?
If you are termed as a high-risk applicant due to a medical illness, poor health or dangerous occupation, you may be asked to fill up extra forms. To further cover the associated risk involved, the insurance company may also require you to pay a higher sum as your premium cost. This usually occurs to only a small fraction of the applicants. And an even smaller fraction of the population may not be eligible for any form of coverage at all.
Do certain policies bypass the process of underwriting?
An important clause to remember is that those applicants who apply or receive their life insurance from their employer or super are more likely to bypass the risk assessment process as a whole. In this situation, most insurance companies decide to avoid assessing every single individual involved in the life insurance policy. Some insurance companies may, however, decide to apply the ‘Group Policy’. This type of policy involves assessing everyone involved as a group. Through this technique, the risk is spread over everyone involved in the group.
References for this this articles: Federal Register of Legislation