Types of life insurance in Australia
The main type of life insurance available in Australia is Term Life Insurance, which is offered for a set term, usually until your age 99. Life insurance premiums are paid either annually or monthly in exchange for protection. If you stop paying your premiums, you are no longer protected.
Many insurers place other types of personal insurance under the life insurance umbrella, including:
It should be noted that Whole of Life Insurance and Universal Life Insurance is no longer available in Australia.
Who should buy life insurance policies?
If you want your family to be financially protected when you pass away, then you need life insurance. You may also need cover if you have some outstanding debts like a mortgage or other personal loans. Ask yourself if life insurance is essential to the financial protection of your loved ones.
How much life insurance coverage should I have?
The amount of coverage you need will depend on a number of factors, like the amount of mortgage or personal debt you have, the age of your children, if you have any, and the amount of income your family will need when you’re no longer there to provide for them.
In the least, you will want enough coverage to pay the mortgage, your funeral, and have enough income for your children until their age 18. If you would like to leave more funds for other relatives or friends, then this will need to be factored in as well. As a rule of thumb, you should consider a minimum amount equal to ten times your annual salary. However, this amount should be determined by your specific needs and unique circumstances.
How are life insurance premiums calculated?
The cost of premiums varies according to your individual factors. Insurers will base standard premiums on the following:
- Smoking status
In assessing your rates, an insurer may also ask for a medical examination. This assessment is done at the expense of the insurer. It is important to note that insurers who ask minimal questions and sell cover without medical assessment often have higher premiums.
If you are seeking cheap life insurance premiums, then it may be best to choose a company that does ask a lot of questions and requires you to complete a comprehensive medical disclosure statement. Doing this will generally result in lower premiums without compromising on the quality of your life cover.
Who will get my life insurance benefit?
Most life insurance policy contracts allow the life insurance policy owner to nominate a beneficiary, or beneficiaries to receive any benefit payments. A life insurance company cannot ignore or overturn this nomination as it binds the life insurance company to pay the nominated beneficiary or beneficiaries.
You can nominate up to 5 beneficiaries in a life insurance policy, and these beneficiaries can be amended by the policy owner at any time should you wish to change your beneficiary. Having your life insurance policy correctly set up will ensure that your proceeds will end up in the right hands.
Whether you’re purchasing your first life insurance policy or want to ensure your current policy still provides value, then you might want to shop around and compare quotes to find the best one for your unique requirements at the best price.
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