While it may not be something on your mind when you’re young, a life insurance policy is actually an asset in the long run for any Australian. From giving your family peace of mind after your passing to even utilizing the cash value in certain circumstances, this insurance coverage is a great safety net to have. Let’s take a closer look at what life insurers will offer up to applicants, and get a better understanding of this kind of coverage.
Understanding Types of Life Insurance
When it comes to life insurance, there are two main types of coverage: term life insurance and universal life insurance. Term life coverage is exactly what’s in the title. It’s an insurance policy that offers coverage in the event of your passing but only for that set period of time. You can extend the amount of life insurance beyond the end of the term when it expires. Universal life insurance, also known as a whole life insurance policy, covers you for the entirety of the time that you are alive, so long as you continue to pay your premium.
In Australia, lifetime coverage can offer up a form of financial security for you later on in life. Whole life insurance builds cash value over time with each premium payment and can be seen as a form of income replacement later on in life. Keep in mind, this can be borrowed against a policy’s death benefit, which means that the payout upon your passing to your beneficiaries won’t be as significant. Be sure to consult with financial professionals if this is the approach you’re considering as a policy owner.
Other Insurance Products
Beyond term and whole life insurance, there are additional insurance products available for Australians to choose from. One of those is total and permanent disability insurance, or TPD. This provides coverage when you as a policyholder sustain a permanent illness or injury. You’ll receive a lump sum in the event that you are unable to return to work, offering you and your family some financial security.
There’s also income protection insurance. An income protection policy can pay up to 70% of your pre-tax income for a set period of time that you are kept out of work by a partial or total disability. This could allow you to stay on top of your expenses, giving you a sense of financial protection while you’re sidelined. You could also look into trauma insurance. Also known as critical illness or recovery insurance, it provides coverage if you become critically ill or seriously injured. Recipients get a lump sum amount in the event of circumstances like a cancer diagnosis, heart attack, or major injury.
Factors into Premiums/Life Insurance Cost
Most insurance companies offering up life insurance coverage will require a physical exam before you can sign on for a policy. This is to get an assessment of your overall wellness and the risk of the coverage. Smokers or those in high-risk employment may be considered more likely to have a payout of the policy sooner, which is why insurance companies may place a higher premium on those policies to cover the funeral costs down the line for your beneficiaries.
If you’re looking for the best rate, premiums can be impacted by not only the amount of life insurance your coverage has but also the type of policy: term life or universal life. It’s also recommended that you purchase a certain amount of coverage as a younger person, as premiums and levels are usually more affordable. You can also expand your coverage over time, as you seek to utilize the financial products with this insurance. Remember, this is a great safety net to have in the long term.
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