Life Insurance Blog

Owning two (or sometimes more) Life Insurance policies is quite common. In fact, there may be some good reasons for doing so. However, depending upon your situation, consolidating into one policy may simplify things and save you money.

Why have more than one policy?

Some of the common reasons for owning one policy are as follows.

A combination of personal and business needs

As well as protecting your own individual situation, you may have business needs that require a separate Life Insurance policy. The use of Life Insurance to protect businesses against the unexpected death of an equity holder or Key Person is very common. The insurance policy still covers the individual, but the business pays the premiums.

Changing situations

Often when people obtain their first life insurance policy, their needs are quite simple. E.g. they simply want to cover the mortgage on their home. However, as situations change (e.g. the arrival of children) additional life insurance is usually required to also replace lost income. While it may be possible to increase the benefit level of the initial policy, it may also be simpler or more beneficial to obtain a second policy to cover the increased need.

A mix of stepped and level premiums

Life insurance policies can be paid using two different types of premiums, stepped and level.

• Stepped premiums start out cheaper, but increase with age.
• Level premiums start out more expensive but stay fixed over time.

Because your situation will change, having one stepped and one level policy can save you a lot of money over the long term.

Inside and outside Superannuation

At commencement, all complying Superannuation funds are required to include a small amount of Life Insurance. Holding Life Insurance inside Superannuation helps reduce burden cash flow, but it also reduces the balance of your Superannuation fund. Life Insurance benefits inside Super are also taxed if paid to a non-dependent Some people, therefore, choose to have some of their life insurance outside Superannuation.

Things to keep in mind

Disclosure is important

When applying for a life insurance policy, the insurer will usually ask you to provide details about any other life insurance cover you have in place. It is important that you accurately disclose this information. Failure to disclose can result in the new insurer refusing to pay a future claim.

How to save money

Regardless of the number of policies you need, using one insurer will allow you to avoid duplication of administration costs while also obtaining any volume discounts the insurer offers.

Ask your adviser to show you the difference between level and stepped premiums over the long term and consider using a mix of the premiums types.

As long as you have considered the potential tax consequences, funding some of your Life Insurance through Superannuation can save you money. To avoid the insurance premiums reducing your Superannuation balance, you could also consider making personal contributions to your Superannuation. Doing so may also have tax advantages or get you access to the government co-contribution. Your financial adviser can give you more information about these topics.

Before you consolidate

It is generally not difficult to consolidate your life insurance into once policy. Before doing so, however, you should answer the following questions:

1. How much life insurance do you really need?
2. Are any of your existing policies still meeting your needs?
3. Can any of your existing policies be altered?
4. Are there alternative products that offer a better mix of cost and benefits?

How we can help

The personal risk specialists at LifeInsuranceQuotes are experts at helping our clients find the most appropriate life insurance solution for their unique situation. We constantly review products from Australia’s highest quality insurance companies, enabling you to easily compare and make an informed choice. Complete our online form today and one of our life insurance experts will contact you within 24 hours.

[social-bio]