Helpful Life Insurance Information
What is Life Insurance?
Life insurance provides a lump sum payment to your beneficiaries upon your death or upon your diagnosis with a terminal illness that will end in death within 12 months. Life insurance helps prevent financial trauma from compounding the emotional trauma your family would inevitably suffer. Compare life insurance.
CANSTAR also researches and rates other related products that you can compare and buy in a package together with life insurance:
Trauma Cover to provide a lump sum payment if you suffer a critical illness or injury.
Total and Permanent Disability Cover (TPD) to provide a lump sum payment if you become totally and permanently disabled so that you are no longer able to work.
Income Protection Insurance to provide a monthly payment if you are unable to work due to serious illness or injury.
Sadly, many Australians do need to fall back on their personal insurance each year, with The Risk Store advising that total claims paid out by retail insurers top approximately $5 billion per year.
If you’re not sure that you really need personal insurance, ask yourself the following questions:
If you died, would your family be able to maintain its current standard of living?
As well as current standard of living, would your family be able to afford the future goals you had set?
If you were permanently disabled, how would your family pay the bills? If you don’t have a family, who would look after you and would you be able to afford the care?
How long could you continue to pay your bills without your income?
If you suffered a significant injury, could you afford home modifications?
The general auto insurance
How would you pay for the cost of any long-term rehabilitation you may need?
If the answer to any of the above indicates the need for extra money to be available, you need to look at personal insurance!
Just as with many other products nowadays, there is more than one way to buy life insurance. In fact there are three main ways, as follows:
1. Life insurance directly from an insurer
Buying direct is essentially a way of DIYing your life insurance. It is up to you to determine what type of policy, policy conditions, and sum insured will fit your needs.
The advantage of buying life insurance directly through an insurer is speed: as the products tend to be simpler in design, you can generally get a response quicker.
The main disadvantage is that, as you are not receiving professional advice, you may not be sure what type of life insurance would best suit your needs.
Direct life insurance products appeal to people who know what they want and like the idea of having a straightforward life insurance policy in place to protect their family and assets, should the worst happen. Find out more in CANSTAR’s Direct Life Insurance Star Ratings report.
2. Life insurance through a financial adviser
Depending on your personal situation, buying life insurance through a financial adviser may work out to be more cost-effective than buying directly and may provide a higher level of cover.
This approach enables you to receive professional advice about what insurance will best suit your needs. Receiving advice doesn’t have to be time consuming – you can apply over the phone if you want to.
The main potential disadvantage is the time taken to underwrite the policy: because the policies provided via advice tend to be more comprehensive products, they can take longer to be assessed and approved by the underwriting department. It can be a small price to pay, though, for the guidance you receive.
3. Life insurance through your superannuation fund
The advantage of holding life insurance within your superannuation fund is that, as the premiums are deducted from your superannuation account, the policy cost is not hitting your hip pocket in the short term. Generally, there is a base level of insurance cover available automatically, with no need for underwriting.
Every year, we perform a detailed analysis of both types of life insurance, to help you to choose a policy that provides the cover you need at an affordable price.
If you’re ready to consider your life insurance needs, CANSTAR can help.
Life Insurance Glossary of Terms
Please note that these are a general explanation of the meaning of terms used in relation to life insurance.
Policy wording may use different terms and you should read the terms and conditions of the relevant policy to understand the inclusions and exclusions of that policy. You cannot rely on these terms to the part of any life insurance policy you may purchase.
Refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG).
Duty of disclosure: When you complete an insurance application, you are required to disclose everything you know about your health, occupation, sport activities or other lifestyle risks, and income. If you fail to comply, you may come unstuck at claim time when the insurer writes to your doctor or Medicare to obtain your health history.
Exclusion: The insurance company may exclude a hazardous sport or activity, which means you will not be covered if you become injured, sick, or die while doing that activity. Learn more about common exclusions.
Guaranteed future insurability: The option to increase your sum insured without having to provide health evidence or go through the underwriting process. Usually this option is available when you have certain life events defined in your policy, such as marriage, birth of a child, or increasing your mortgage.
Income protection insurance: Cover designed to replace 75% of your income when you cannot work due to a sickness or accident. Some policies also cover you if you can only work in a reduced capacity while you are recouping, such as part-time. Compare income protection.
Level premium: The premium is calculated and based on your age at the start of the policy. The premium may still increase along with inflation or for a certain occupation category, but not based on your age. Learn about the difference between stepped and level premiums.
Occupation category: Grouping together occupations with similar duties and risk levels.
Full life insurance
Premium loading: An insurance company may charge higher premiums if you fall into a certain risk factor category, such as being overweight, smoking, or having high blood pressure.
Term life insurance (death cover): Term life insurance covers you if you die or are diagnosed with a terminal illness with less than 12 months to live. Be aware that some death cover within superannuation may not have a terminal illness benefit.
TPD any occupation: You are covered if you become disabled so that you are unable to work in any occupation. For example, a surgeon could become a GP and continue to work and earn an income, meaning they would not be eligible to claim on their TPD cover. Compare TPD insurance.
TPD own occupation: You are insured if you become disabled so that you are unable to work in your own current occupation. For example, if a surgeon could no longer do surgery, they would be eligible to claim on their TPD cover, and the insurance company could not make him become a GP instead. Compare TPD insurance.
Trauma cover (critical illness insurance): Cover for a lump sum payment if a defined health event happens to you, such as cancer, heart attack, or stroke. The majority of policies have an extensive list of conditions covered, so it’s worthwhile comparing your options, as they do slightly differ from policy to policy. Compare trauma insurance.
Underwriting: The process where the insurance company’s underwriter (the insurer’s insurance provider) assesses your application for insurance cover. They look at your health, occupation, sport activities or other lifestyle factors, and income. The underwriter may accept you as a standard cover (first class rate), offer you special terms for cover, or may reject you outright.
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Life Insurance Articles & Guides
Who offers Direct Life Insurance in Australia?
Below are some direct life insurance providers we rate or view more here:
Who offers Advised Life Insurance in Australia?
Below are some advised life insurance providers we rate or view more here:
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