Types of Life Insurance Policies
A Life Insurance policy can contain a number of different types of insurance. You can bundle them into a comprehensive package or choose just one or two features.
A key aspect of Life Insurance is Life Cover. Also known as Term Life cover, life cover is an agreement to pay a lump sum of up to $1 million or more in the event of your death or diagnosis of a terminal illness. This is defined as an illness from which you are expected to die within 12 months (as assessed by a medical practitioner), thereby making you eligible for an advance payment.
Personal or business
Insurance providers of policies designed for couples, families and employees often offer discounts for joint policies.
Income Protection insurance provides up to 75% of your income if you find yourself unable to work because of illness or injury. It can help you focus on rest and recuperation without worrying about your finances, including debt repayments and living expenses for you and your dependents.
Total Permanent Disability Insurance
Total and Permanent Disability insurance (TPD) provides a lump sum payment if you become totally and permanently disabled and are unable to work again. It can help cover rehabilitation costs, debt repayments, and daily living expenses for you and your dependents.
Trauma (Critical Illness) Insurance
As a result of illness, you may need extended time off work. Standard income protection insurance and life insurance may not cover the accumulating costs associated with recovery mingled with everyday expenses.
Trauma insurance, also known as critical illness insurance, provides a lump sum payment on diagnosis of a serious medical condition. It can help cover medical care expenses as well as contribute to paying off your debts, including a mortgage or credit card debts. Make sure you know just what illnesses are covered by Trauma Insurance.
Want to Know More?
Looking to learn a bit more about Life Insurance before you commit? Click on one of the questions below to have your topmost questions answered:
- Why do I need Life Insurance?
- What will I get from Life Cover?
- How are Life Insurance premiums calculated?
- Under what circumstances can I receive my Life Insurance cover?
- How do I choose the best Life Insurance policy for me?
Why do I need Life Insurance?
Whether young or old, Life Insurance may be valuable for you. You might not believe it, but Life Insurance can be just as useful to a single 25 year old as it is for a married 45 year old, or even a 65 year old entering retirement.
Life Insurance benefits anyone concerned about protecting their family’s way of life. It applies to you if you have, among other things:
- A regular income you and your dependents rely on
- A home mortgage
- Outstanding debts
- Education costs
It can even help you out as you enter retirement. Policies are available for customers over 50 and up to the age of 79, where they no longer support their children but still have a partner at home who is dependent on them.
Want to know how life insurance can impact you directly? Just click on your circumstances below:
- Single young adults
You may not think Life Insurance would matter if you were young, single and healthy. In fact, it can matter a great deal to you and your loved ones. It can protect you financially should you sustain a serious injury or illness. It can also help your loved ones cover your funeral costs and outstanding debts if you were to pass away unexpectedly.
- Adults with children
Life Insurance guarantees financial stability and security in your children’s lives even as they are turned upside down. It allows you to continue to pay the bills, buy the groceries, pay off the mortgage and cover the kid’s school fees even with the loss of income.
There are plenty of reasons why Life Insurance may be relevant to you at this age. Whether you’ve worked hard to accumulate more cash and assets or your superannuation isn’t as large as you’d hoped, Life Insurance can help you sit back and enjoy your retirement.
What will I get from Life Cover?
Life Cover is a relatively simple type of insurance cover. There are usually only minor variations in the type or extent of cover offered by different companies. If you want to know what features to look out for with your Life Cover policy, learn more here. The payment can be used to:
- Settle any existing debts such as credit card and mortgage
- Provide a regular income so your dependants are able to maintain their lifestyle and achieve their goals
The most important things you’ll want to include in Term Life Cover are Terminal Illness and Funeral benefits.
Terminal illness benefit
A terminal illness benefit means that if you’re diagnosed with a terminal illness and have less than 12 months to live, you will receive a lump sum payout following the doctor’s diagnosis.
A funeral benefit, also known as an advanced payment, provides your family with extra financial assistance of up to $30,000 paid immediately upon death to help with urgent costs.
It is up to you to decide what you want to get out of your Life Insurance policy. You can make sure you have additional cover to ensure you’re protected for any eventuality. Most of the time, Life Insurance policies offer Total and Permanent Disability (TPD) and Trauma (or Critical Illness) Insurance as well as Income Protection.
How are Life Insurance premiums calculated?
This is perhaps the most confusing area of Life Insurance for those looking into buying a policy. There is no set premium for everyone. Premiums are calculated according to a person’s individual circumstances, including (but not limited to):
- Age – with premiums increasing as you get older
- Gender – Life Insurance is less expensive for women as they live longer than men on average
- Whether or not you are a smoker
- The amount of cover you need to cover your daily living expenses
- The amount of savings you may have accumulated
- The size of your mortgage, debts and education fees
- Additional insurance options you select
If you want the most comprehensive guide to calculating your Life Insurance premiums, download our free eBook Life Insurance: A Colossal Undertaking. This book provides you with the six questions to answer that will affect your premium.
Under what circumstances can I receive my Life Insurance cover?
When you are eligible to receive cover depends on the specific circumstances you agreed to when you started the policy. At a minimum, you or your family will receive Life Cover benefit after death or diagnosis of a terminal illness with less than 12 months to live. In the case of a terminal diagnosis, you must be provided with medical evidence of the diagnosis to quality for the benefit. You will typically receive the payout within a fortnight after a claim was made.
You can also receive cover if you elected to have TPD or Trauma Insurance.
TPD payments usually only begin after the insured person has had a disability for between three and six months and is deemed by a doctor unlikely to ever be employed again. Some companies do provide exceptions to this rule for certain medical conditions.
With Trauma Insurance, most specified medical conditions can result in an immediate payout after your claim is approved. But there can be a delay of up to three months for some specified medical conditions, such as heart attack, cancer and stroke.
With some policies, you will also not receive a payout if you suffer from some conditions – such as heart attack, diabetes, and leukaemia – within three months of the benefit being activated. For a full list of illnesses that can be covered by Trauma Insurance, click here.
|Payment Conditions||Waiting period|
|Life Cover||Upon death or terminal diagnosis of an insured person. In the case of terminal illness, the doctor must have given the person less than 12 months to live||Typically 14 days after the claim is approved|
|TPD Insurance||Upon the doctor’s assessment that the person is unlikely to ever be employed again||Insured person must have had the disability for 3 to 6 months|
|Trauma Insurance||A list of specified medical conditions is provided in your policy. You may not receive a payout if you suffer from some conditions within 3 months of activating a cover||Most conditions trigger immediate payout after the claim is approved. There can be a delay of up to 3 months for some conditions|
How do I choose the best Life Insurance policy for me?
With many competitive life insurance packages available, finding the option that is right for you and fits your financial goals can be challenging. Wealth Smart’s advisers have the expertise to help you assess your unique life situation, and find the life insurance solution that is the best fit for you and your family. Contact us today or get a quote online below.
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