Tag archive: income benefit

Insurance: Rundown on Life Insurance

Your life is worth the investment and considering life insurance can secure you and your family in times of great need. For example, if you were to leave dependants behind, your policy will ensure they are financially secure and able to meet ongoing expenses.

According to George from Aussie Finance Blog, “everyone is ultimately vulnerable to health complications and accidents, so it’s hard to understand why anyone with available finances would remain uninsured. It’s true that nobody wants to contemplate death for themselves or their loved ones, and when things are going along nicely, life insurance is easily forgotten. However, there’s no denying that life insurance cover could prove invaluable in a time of need.”

Let’s take a look at the different types of life insurance options available and are suitable to your needs:

Term Insurance

The most common life insurance policy is a term insurance. You are able to choose the length of your insurance plan, with policies generally set for a period between 10 to 25 years. The agreed payment, or ‘sum assured’ is agreed upon when you take out the policy, but remember to read the fine print as some policies don’t pay out if you die soon after taking out cover. If the set policy time-frame expires before you die, there is no pay out. There are several term insurance variations:

  • Level term insurance: The ‘sum assured’ amount of cover remains the same for the duration of the policy.
  • Decreasing term insurance: Your pay-out will reduce over time, usually in keeping with reduced mortgage repayments or other debts.
  • Increasing term insurance: Your pay-out increases over time to keep pace with the cost of living, and is usually pegged at 5%, or in line with inflation.
  • Guaranteed premiums: Your payments will remain the
    • same over time, assisting you with budgeting.
    • Reviewable premiums: This can be less expensive initially, but is subject to review, with the potential for payment increases over time.

     

    Factors that will be considered:

    The good news is that life insurance premiums are currently much lower than they were previously. Factors that influence the cost of your insurance cover include:

    • Your age
    • Health considerations
    • Occupation
    • Smoking status

    If you stop smoking after taking out cover, let your insurance company know, as they may reduce your monthly premiums. Honesty is important, and if you provide false or misleading information regarding your health or smoking status your policy will be invalidated and you won’t get a pay out.

    Family Income Benefit

    Instead of being paid a lump sum, your family will be provided a regular monthly tax-free income for the remaining duration of the policy term after you die. The downside is that if the policy expires shortly after you die, your family will only get monthly payments for a short period of time.

    Whole of life cover

    This kind of policy provides a guaranteed pay out, and as a consequence premiums are much higher than for term insurance. You will also be paying premiums until you die, even if you have already cleared your mortgage and are in a good financial position.

    Over 50s life insurance

    This policy option is popular with those who have been a little slow getting around to life insurance cover. An attraction is that you will be accepted even if you have a medical or illness history. However, these policies commonly have a maximum age limit, and will need to be in place for a period of time for a claim to be considered. Premiums can be inexpensive, but cover is also relatively low, and will only assist with immediate expenses, such as funeral costs.

    All information sourced, detailed and provided by: Aussie Finance Blog