We all hope the worst won’t happen. In fact, most of us operate as if it never will. But that doesn’t mean we don’t prepare for all eventualities. I will probably never win an Oscar but that doesn’t mean I don’t have a speech prepared. Life insurance is an emotional issue but is something to consider, especially if you have dependents.
This guide provides the ins, outs, where to look and what to look for when thinking about purchasing life insurance in Australia.
What Is Life Insurance?
A policy holder pays a premium (monthly, quarterly, annually) to an insurer. In return, the insurer will pay out a sum of money to a nominated beneficiary should the policy holder die within the term of insurance.
Why Do We Need Life Insurance
Life insurance is usually about peace of mind. People tend to take out life insurance once they have dependents, often when they get married or have their first child. If you are an income provider for your family, they will probably be unable to maintain their standard of living should you die. Likewise, if there’s a mortgage to cover, your partner might find it difficult to continue repayments if you’re not insured.
Some life insurance policies are paid out when you are diagnosed with a terminal illness, which can assist with medical costs. Other times, it’s a provision for the cost of the funeral. It’s providing for those you love, should the worst happen.
Types Of Life Insurance
The category ‘life insurance’ covers a wide range of insurance options. Life insurance is insurance should the policy holder die, and coverage can range from covering the costs of the funeral through to covering the costs of debts, the funeral and providing ongoing financial support for your family. You can either purchase ‘whole life’ which covers you up to 99 years and can be expensive, or ‘term’ which covers you for a specific time period (usually 5 to 15 years)and may be renewed.
When purchasing life insurance, you can also look at including insurance should you be permanently unable to work, or are diagnosed with a critical illness.
Life Insurance In Action
The first step when thinking about life insurance is to work out how much you need to be insured for. Things to consider include your income, your debts, the costs of providing education for older children or childcare for younger children. Cannster have a simple downloadable calculator to help you estimate the sum you will need to be covered for.
Then consider what combination of the above forms of life insurance you would be looking for. You will be asked your occupation and annual income. You will also be asked about your gender, age, smoking and drinking habits, and some questions about your medical history. All of this will determine how much you are insured for, and what premiums you will pay.
You have a duty of disclosure, and not disclosing a medical condition when applying for life insurance can mean your insurer has no obligation to pay the claim.
Quotes And How To Get Them
It’s not hard to get a life insurance quote, a quick google will reveal how many options and companies are on offer. Check out iSelect or You Compare both of whom will get a consultant to call you once you’ve filled out some preliminary information online.
I also used Infochoice for some quick online suggestions. It’s not conclusive, but a good place to start when checking out your options. Insurance companies also have consultants who can take you through the policies, if you’re considering going through your bank or superannuation fund.
A new player that also exists includes Choosi who look to compare all forms of insurance on a single website.
Life Insurance Comparison Tips
Once you’ve decided how much cover you need, and narrowed down your field of insurance providers, looks through their product disclosure statements. This should provide everything you need to know about the product, the attendant fees, the benefits and any limitations. It’s not just about cost; it’s about choosing the company that’s going to provide properly for your family. The need to compare life insurance cannot be overlooked and is the single most important way to save money.
Check the product is inflation-indexed, and what restrictions there are for age, dangerous work, casual work and maternity leave. If there’s something you don’t understand, ask the provider. If they can’t explain it, look elsewhere.
This is not an area where the cheapest is necessarily the best; you want a reliable and sustainable provider so ensure you’ve checked the company history and researched their long-term viability.
Life Insurance Companies
Life insurance is a competitive marketplace, so there are a lot of options. Some of the big Australian providers registered with the Australian Prudential Regulatory Association include; AIA Australia, Allianz, AMP, BT, ClearView, Colonial, HCF, Macquarie, MLC, OnePath, St George, Westpac and Zurich Australia.
How To Save Money On Life Insurance
The first step in reducing your premiums is to get healthy. Quit smoking, cut down on your drinking, start exercising. Not only will your premiums be lower in general, you’ll also be less likely to get significant lifestyle diseases that will increase insurance costs. It’s also important to only cover what is necessary. This is preparation for an emergency, you don’t want to sacrifice your current quality of life covering more than is realistic.
It’s also important to continue to make adjustments to your policy- in both directions. If your family gets bigger, maybe think about increasing your protection. But if your kids leave home and you pay off your mortgage, maybe you can look at lowering your costs.
Common Questions About Life Insurance
Q: What Is ‘No Questions Asked’ Insurance?
A: Simply, an insurance policy that asks few questions about your medical history and doesn’t require a medical evaluation or information from your local doctor. While an appealing idea for oder people or people with chronic diseases, these policies are generally much more expensive as they insure people with higher risk.
Q: What factors are likely to increase my premium?
A: Gender, with men being assessed as a higher risk than women, can result in a higher premium. Smoking, being overweight or having some diseases- sometimes even conditions such as sleep apnea- can result in a higher premium.
Q: Will I need a medical exam?
A: With most providers, it’s unlikely you’ll need a medical exam if you’re under 45, unless you’re being insured for over $2.5 million. From 45 years onwards, you will probably be required to have a medical evaluation.