What is life insurance?
Life insurance is a protection plan for your loved ones, so if the worst were to happen the lifestyle you and your family are accustomed to may continue. Life insurance generally refers to term life insurance, which is a lump sum paid out to your beneficiaries in the event of your death or, in some cases, diagnosis of a terminal illness. If your family would struggle without you to cover the cost of household bills and living expenses, term life insurance could come in handy.
Looking for a life insurance policy? The table below provides a snapshot of products rated by Canstar, with links to providers’ websites. These results are based on a 30-39 year old male white-collar worker who is a non-smoker and the results are sorted by star ratings from highest to lowest. To compare life insurance policies based on your occupation click here.
Different types of life insurance
In addition to term life insurance, there are other types of life insurance products to choose from that provide cover in circumstances other than death.
Income protection insurance
Income protection is designed to provide a monthly benefit if you’re unable to work due to injury or serious illness. In most cases, this type of insurance can cover up to 75% of your pre-tax income. With the right level of cover, income protection should assist you and your family until you’re back on your feet or your benefit period ends.
Below is an example of income protection policies for an accountant. These results are based on a 30-39 year old female who is a non-smoker and the results are sorted by star ratings from highest to lowest and with links to providers’ websites. To compare income protection policies based on your occupation click here.
Total and permanent disability (TPD) insurance generally pays you a lump sum if you become totally and permanently disabled. Although, the definition of permanent disability varies between insurers, often it means that you are disabled to the extent that you’ll be more than likely unable to work again.
Total disablement will most likely also affect your ability to care for young children. This may make TPD insurance more appealing to parents who might benefit from a lump sum payment to help cover the cost of childcare and other household expenses.
TPD cover is typically available as a stand-alone policy or as an optional extra when taking out life insurance through a financial adviser.
Trauma insurance provides a lump sum in the event that you suffer from a critical illness or a medical incident that significantly impacts your life. Particularly, if your private health insurance or Medicare doesn’t sufficiently cover traumatic health incidents, trauma insurance can help you meet your medical costs and/or allow you to take time off to recover. For a list of conditions often covered by trauma insurance click here.
Trauma insurance is also usually available as a stand-alone policy or as an optional extra when taking out life insurance through a financial adviser.
According to the Australian Securities & Investments Commission (ASIC) funerals in Australia typically cost anywhere from $4,000 to $15,000. That is a hefty sum to pull together and for some may be a huge blow to the hip pocket. Thankfully, there is funeral insurance if it’s unlikely you would be able to cover the cost of farewelling a loved one. Some life insurance policies can cover funeral expenses in the event of the insured’s death, so you may not need a separate funeral insurance policy.
Do you need life insurance?
In the event of your death, critical illness or loss of income would your family be able to cover the mortgage, household bills, funeral expenses, school fees and other daily expenditures? If anyone is dependent on your income this may be reason enough to consider life insurance.
If you already have a form of life insurance or are considering it, make sure you adequately compare insurers and are getting value for money.
As always, we recommend that you shop around for a policy that’s right for you, and that you read the Product Disclosure Statement (PDS) carefully to check what cover is included for any policy you are considering.