Life Insurance pays a lump sum benefit upon death or (in most cases) terminal illness of the life insured. The benefit can be used to:
- replace lost income for your family
- pay off debts you owe
- pay for funeral costs, estate fees, etc
- make a donation to charity
Prior to choosing a life insurance solution, here are some of the key questions you should answer
How much do I need?
Everyone’s situation is unique, and therefore the amount of cover you choose should always be tailored to your situation. While it’s important to make sure you are adequately protected, it’s just as important to ensure you don’t pay for more protection than you need.
The following questions will help you determine the level of insurance you require:
- How much debt do you want paid off when you die?
- How much income will your family need, and for how long? (e.g. $50,000 for 10 years = $500,000)
- What other expenses (e.g. funeral, legal fees) do you want paid?
Online calculators such as this one help translate the answer to these questions into a Life Insurance amount.
For how long will I need the policy?
The answer to this question can help identify ways to save money on your policy. When you obtain a life insurance policy, you can generally choose either Stepped or Level premiums.
Stepped premiums start out lower, but (Step Up) increase with age and over the longer term will cost you a lot more money. Level premiums are initially more expensive, but stay constant with age.
If you plan to have the policy for > 10 years, then you’ll likely want to consider Level premiums.
To whom do I want the benefit paid?
There are two ways to determine how your life benefit is paid.
You can nominate one or more beneficiaries, in which case the Life Insurance company will pay the benefit directly to those people.
You can decide not to nominate a beneficiary, in which case the Life Insurance benefit will be paid to your estate and then governed by your will (or the court of law if you don’t have a will).
Do I want any other type of cover?
While Life Insurance provides financial protection in the event of unexpected death, financial hardship can also be caused by unexpected accident or illness. To help protect against these scenarios, you may also want to consider:
The insurer you choose should provide good quality cover across all insurance types.
Comparing Life Insurance Options
Once you’ve considered the above questions, the next step is to look for an insurance provider and product that are best matched to your needs.
The cost and quality of Life Insurance products vary, so it’s important to do your homework and choose the cover wisely. An uninformed decision could see you wasting money on a policy that won’t actually work for you when you need it most. For example some Life Insurance products underwrite at claim time, meaning they can request medical records and tests before agreeing to the claim. They can also deny a claim based on your medical history. A quality product, on the other hand, will conduct all underwriting up front so there are no unfortunate suprises at time of claim.
More information about Life Insurance can be found in other posts on this site as well as in our FAQ.
If you would like help getting the best possible cover at the lowest price, complete our online form and one of our personal protection specialists will contact you within 24 hours.