Co-author: TJ Ryan
When should you switch life insurance policies?
It is a good idea to review your life insurance regularly, especially if something has changed in your life, for example, if you’ve taken out a home loan, are having kids or starting a business. In fact, research shows that having a child is the number one reason why Australians take out life insurance in the first place – you have a family to support, after all.
If your current policy no longer provides good value for your situation, it’s time to switch life insurance policies. We can help you there.
Types of life insurance
There are different types of cover that fall under the broad heading of life insurance. Depending on your circumstances you may need one or more of the following:
- Life cover: Also known as ‘term life insurance’, or ‘death cover’. When you pass away, life cover pays out a set lump sum of money. The people you nominate as beneficiaries on your policy will receive the money.
- Total and permanent disability (TPD) cover: If you are totally and permanently disabled, TPD cover pays a lump sum to assist with rehabilitation and living costs. TPD is often bundled with life cover.
- Trauma cover: Also known as ‘critical illness insurance’. If you are diagnosed with a specific insured illness or injury, trauma coverprovides a lump sum of money to cover immediate medical expenses and other financial needs. Trauma cover is often bundled with life cover.
- Income protection: Income protectioncover pays you a monthly benefit if you are unable to work for longer than your waiting period, because of illness or injury. This insures you for a set level of your income (commonly 75% of your gross salary) and will pay you at that level until you are able to return to work, or for the agreed period of time (benefit period) – whichever is sooner. Income protection is often bundled with life cover, but can also be bought as a separate policy.
Things to consider before switching
Consider the following checklist before switching policies:
|Does a different type or amount of life insurance suit your needs better now?|
|Consider the pros and cons of taking out a life insurance policy within your superannuation fund.|
|Find out the extra cost that a new policy could incur.|
|Your age, current health, and medical history are all factors that will be considered when you apply for a new policy. Would you be better off staying with your current policy, to avoid your pre-existing conditions being excluded?|
|Any waiting periods associated with the new insurer – you don’t want to leave yourself uninsured at any point.|
|Level of cover – will you be receiving the same level of cover, and is this the cover you need? For example, if your current insurer covers any pre-existing conditions, will your new insurer do this as well?|
How to change life insurance policies
Compare before you change
Before making any large purchase decisions, it’s important to do your research. There are many features to look for in a direct life insurance policy (one you apply for on your own) and advised life insurance policies (but your financial planning adviser can tell you all about those).
Fortunately for you, CANSTAR compares over 50+ life insurance policies to find the perfect one to suit your needs. Compare policies to cover your life and income for the sake of your family or your business: