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Life Insurance Benefits and Features that Can Add Value

Russell Cain Fact Checked Updated: 20 May 2020

Life insurance policies offer multiple built-in benefits and additional low-cost options that when included in your cheap life insurance policy, has the potential to enhance its value.

Selecting the right life insurance features and benefits for your unique situation can play a huge part if you ever need to make a life insurance claim. Knowing what you are covered for and the benefits it provides is essential to helping you and your loved ones’ cope during some of the worst financial and emotional times of their lives.

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Why life insurance is important

Life insurance is essential if your family’s livelihood depends on your financial support. A lump sum benefit can typically provide financial support to your loved ones if you pass away or get diagnosed with a terminal illness. Life insurance is especially significant if you are the sole or predominant income earner.

A life insurance benefit can be used for:

7 Essential life insurance features

Life insurance policies in Australia generally offer the following features:

  1. Worldwide protection 24/7: Life cover is provided 24/7 anywhere in the world.
  2. Cover up until age 99 or 100: Retail term life policies purchased outside of super usually expire at your age 99 or 100, depending on the insurer.
  3. Tax-free lump sum payout for a self-owned policy purchased outside of superannuation.
  4. Choice of premium payment structures: The most common payment structures are stepped, level and hybrid premiums.
  5. The option of a standalone or bundled policy: A stand-alone policy has its own sum insured, whereas a bundled policy shares the same or lesser amount insured with either trauma or TPD attached.
  6. Guaranteed renewable: In general, insurance companies cannot cancel your policy, reduce your cover or increase your premium, for a retail policy, after you’ve experienced a big life event, as long as you continue to pay your premiums.
  7. Discount options are usually available when paying your premiums annually, and some insurers also provide discounts when you buy more than one policy from the same insurer or add your partner to your policy.

How to get the most out of your life insurance policy

Merely buying a cheap term life insurance policy does not guarantee your protection against all risks. Insurers in Australia generally include different built-in life insurance features in their policies, and if you want to enhance your coverage further, you can usually add optional benefits at an extra cost.

Built-in benefits

Terminal illness cover

If you are diagnosed with a terminal illness and have less than 12 months to live, most life companies will pay your full life insurance benefit to your beneficiaries, so you are covered for death and have access to funds needed for medical expenses.

Funeral advancement benefit

Many policies in Australia offer a built-in funeral advancement benefit which is paid 10 to 14 working days upon receipt of a valid death certificate and completed claim forms. The funds can be used to pay for costly funeral arrangements, with the balance paid out to your estate or nominated beneficiaries after that.

CPI increases

To help your policy keep up with inflation, insurers will generally offer to increase your level of cover by either the CPI or a set percentage each year. The increased level of protection will usually mean an increase in your premium.

Cooling-off period

Most life insurance policies in Australia generally have a 28 to 30 day cooling off period after your policy commences, at which time you can change your mind and cancel the policy. You’ll receive a full refund for any premiums paid during this time.

Financial planning benefit

If your beneficiaries receive a lump sum benefit from your life insurance policy, select insurers will reimburse them for financial planning advice they receive.

Free children’s insurance

Select insurers offer free children’s coverage with their adult life insurance policies or with trauma policies. Cover provided is generally up to $10,000.

Guaranteed future insurability

You can generally increase your level of cover, without supplying additional medical information, when significant life events occur. For example, getting married, taking out a loan for your first home, increasing your mortgage, having children etc.

Premium freeze

If your life cover is on a stepped premium structure and your premiums are becoming a little too expensive, you can opt to freeze your premiums for a 12-month period, essentially keeping it at the existing price. Your level of cover will reduce as a result of freezing your premiums.

Suspending cover

You can opt to suspend your premiums and cover for up to 12 months due to financial hardship. This might also be beneficial to people not working due to extended service leave or sabbatical.

Premium waiver

Select insurers provides you with the ability to waive paying premiums if you are totally and permanently disabled and unable to work.

Optional benefits for an extra fee

Accidental death benefit

Some insurers will allow you to add an accidental death top up to your life insurance policy, which will be paid in addition to your life insurance benefit should your death be due to an accident.

Paid Child Cover

Select insurers offer child cover of up to $200,000.

Business guarantee option

Allows you to increase your business-related life insurance, without supplying additional medical information, as your business grows.

Needlestick cover

Medical professionals usually purchase this option to protect them from needle stick injuries during their regular working hours.

Accommodation benefit

If you have to stay 100km from your home or need a family member to stay and take care of you, this benefit will pay you a certain amount every day during this period.

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