Mar 31

Importance Of Life Insurance

  • 31st Mar 2022

What does life insurance cover?

  • Life cover - also known as 'term life insurance' or 'death cover', pays a set amount of money when you die. The money will go to the people you nominate as beneficiaries on your policy.
  • Total and permanent disability (TPD) cover - pays a lump sum to help with rehabilitation and living costs if you are totally and permanently disabled. TPD is often sold with life cover.
  • Trauma cover - provides cover if you are diagnosed with a certain illness that has a significant impact on your life, such as cancer or a stroke. It is sometimes called 'critical illness cover' or 'recovery insurance'.
  • Income protection - replaces some of your income if you are unable to work due to injury or sickness.
  • Accidental death cover - pays a set benefit if you die as the direct result of an accident (not from an illness or disease). Most accidental death policies include a long list of exclusions, like death from hazardous activities, drugs/alcohol, and self-harm.

How much life insurance do I need?

To work out the amount of cover, consider how much money your family would:

  • need - to pay your mortgage and any other debts, as well as child care, education and living expenses.
  • receive - from superannuation, shares, savings and existing insurance policies, how much paid leave you have and what type of support your family could provide.

The difference between these is the amount of cover you should get.

Always consider your personal circumstances when choosing a policy and deciding how much cover you need. For example, if you are single with no dependents, you may decide that you need less cover than someone with a partner and/or children.

Questions to ask before you buy life insurance

When you're buying life insurance, don't feel pressured to make a quick decision - especially if you've received a call from an insurer out of the blue. Always ask for the product disclosure statement (PDS) and request a call back so you have time to consider the product. Make sure you understand:

  • the events or illnesses covered by each type of insurance
  • the level of cover
  • the ongoing cost of the cover. For example, will the premiums stay the same each year? If not, will you be able to afford the insurance in the long term?
  • how your medical history might affect the policy
  • any exclusions.

Beware of shortcuts - not having to provide any medical details to get covered can mean that the insurance product may have more exclusions and be more expensive.

Pre-existing medical conditions

Before you apply for insurance, check the insurance provider's website or PDS to find out if they cover any pre-existing medical conditions. You will need to give them relevant details of your medical history. If you don't provide this, your policy may not pay out when you need to claim.

What's the difference between stepped and level premiums?

Insurance premiums usually increase with age because the older you get, the more likely you are to make a claim.

For insurance such as life, total and permanent disability, or trauma cover, you may be able to choose between stepped or level premiums.

Here is the difference between stepped and level premiums:

  • Stepped premiums - Your insurance premium increases each year. Depending on your age, your policy, and other factors, your annual premium could increase by hundreds of dollars in just the first few years. If you're thinking about this option, consider how long you intend to hold the insurance for, to make sure you can afford the rising premiums.
  • Level premiums - Your insurance premium does not change as you age but is generally more expensive than a stepped premium in the beginning. Level premiums may increase over time due to inflation (which you can opt out of) or changes to the insurer's fees, but these will be smaller increases than a stepped premium.

If you want to control your costs over time, level premiums may suit you as they are usually higher in the beginning but much cheaper than stepped premiums when you are older. If you intend to hold the insurance for a long time, level premiums will be more predictable.

We put the protection of your wealth first

First we'll optimize the structure of your finances depending on your circumstances and goals. Then we'll implement the strategy and investments to make your life goals a reality. Here's how it works:

Step 1: Understanding you

We'll gather all the information we need to get a clear understanding of where you are and where you want to go financially. To ensure that we can get you there. We'll also explain our process in detail and give you an overview of our fee structure.

Step 2: Building a plan

We'll look deeply at our assets, liabilities, superannuation, investments, tax, life insurance and more to build a tailored financial strategy that connects the dots between your current financial situation and your ideal future.

Step 3 : Solution Delivery

We'll present a tailored plan for building the financial life you want, based on all of the information you gave us. We'll outline the entire process, timing, implementation of steps and answer any questions you might have.

Step 4: Implementation

We’ll collaborate directly with you to ensure your plan stays on track, adjusting as necessary when your lifestyle, goals or financial landscape changes.