What is life insurance?
Most people would think of life insurance as the only cover for death - and that is just one part of it. But it is an umbrella term that could include other benefits such as Total and Permanent Disablement (TPD), and income protection.
Life insurance should be an integral part of everyone's financial well-being. Mainly to ensure that individuals and their families are protected in the event of an unforeseen occurrence such as an accident, illness or, worse, death.
Obviously, you don't really want to think about something bad that will happen to you or to someone you love. However, in the event of something life-changing or life-threatening, having life insurance can be a real comfort. It can give you peace of mind so that you can focus on what matters most at the moment, such as supporting people in need, making decisions about the future, and managing your finances.
Your family's financial independence
Usually when an event occurs people should go into the reserve - if any - or ask for financial assistance from others.
For some people, no one can ask so they have to look elsewhere.
Some people even turn to strangers through websites like GoFundMe, and Facebook. Asking other people to provide financial assistance is a way for those under insurance where someone dies tragically and unexpectedly. They may not have insurance, or they may not have the right amount of cover, and they need to provide for their loved ones.
Depending on the kindness of strangers, it is wrong and can be prevented. It is important that many hold on to insurance and know that their loved ones are protected. It will be a burden on your shoulders and reassure your family and friends.
How does life insurance work?
Life insurance is the same as other insurance policies. When you buy a policy, you enter into an insurance agreement that you will pay a certain amount of cover ('premium'), which usually increases over the years, and make ongoing premium payments.
The insurer then agrees to pay you or your beneficiary under certain events. You also agree to certain terms and conditions as to what - and what is not disclosed - in the event of an accident, illness, or death.
The golden rule of life insurance
Speak the truth and understand good printing.
When you start a life insurance policy it is important that you tell the health insurance company all the relevant information about your health conditions. This is known as the disclosure function, which is the function that describes what you are expected to tell the insurance company.
Some of the questions you will be asked may seem personal - or perhaps even a little detail - but they are all very important, as it helps you get the most out of your policy. The insurance company can ask you related questions:
your medical history
family medical history
Remember to answer honestly: don't try to make yourself sound better. Be foremost because the information you provide when you take out cover will be used when determining a valid claim.
Another document that people do not enjoy reading is the Product Disclosure Statement (PDS). Yes, it is a dry reading, because it should provide details of what is included, as well as other important information such as waiting and release times. It is also important to know what is not included in your cover so that the expectations meet the demand time. If you are unsure about anything in PDS, talk to your insurance agent or financial adviser.
How do I get life insurance?
There are three main ways to purchase a policy:
group policy with your superannuation fund or employer
sales policy through your financial advisor
direct purchase from an insurance company
Cost and installation will vary greatly so do your research before you do. You can start by looking at the MoneySmart ASIC website and discuss your needs with an expert advisor.
Insurance is not one size fits all
Your insurance requirements will vary depending on where you are in life, your family situation, and your savings. This is why seeking advice, even if you choose to do so, is very important when considering what types of benefits you need - and how much you need each.
What is the best year to get life insurance?
The short answer is to get good health insurance before you think you need it. Many people are encouraged to take out life insurance, such as buying a home, having a first child, or even receiving a raise.
While it is best to start at a young age, remember that your needs will change as you progress in life, and your financial obligations will change.
Each insurance company has its own rules for the years in which you need treatment to be accepted, but usually when you are young and in good health, the application process is simple.
How do I know how much life insurance is available?
It is always better to check your needs sooner than later. If you leave it too long, and then have a medical event or improve the condition you will not have a cover instead of something that has already happened.
An easy start to use online tool like the ASIC insurance calculator for MoneySmart Life to help you get a general idea of what you need.
Although it is advisable to talk to a professional counselor about your specific needs.
If you have your active insurance it is important that you enter regularly and make sure that your benefits and payments still meet your needs as your life changes.
What is the difference between advanced premiums and rates?
Choosing between premium premiums and standards is something you have to decide on in the application phase - so it's important to know the difference, know what you're signing up for and what you can afford.
Stepped premiums are usually very popular because premiums start at a very low level when you are young, but then go up year after year, so you pay more as you get older...
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