What is a life insurance pay out?
[social_share]An insurance pay out (or insurance benefit) is the amount of money the insurance company gives to the person insured, or their beneficiaries, if a specified event occurs.
A specified event is one covered under the terms of the insurance policy and can vary widely, depending upon the insurer you choose and the type of cover in place.
Life Insurance
Life insurance is the simplest type of personal protection. Basically it pays out in the event the person insured under the policy dies. However, most modern day policies will also pay the benefit in the event the person insured is diagnosed as terminally ill.
Total and Permanent Disability (TPD) Insurance
TPD insurance is paid when an injury or illness that causes the person insured to become totally and (in the opinion of medical experts) permanently disabled.
A portion of the benefit may also be payable in the event of a specified partial disability. E.g. permanent loss of site in one eye
Trauma Insurance
Trauma insurance is arguably the most complicated of all the personal insurances. Unfortunately, there’s about a 50% chance of making a claim during the life of the policy, so it’s important to choose a good quality product. Modern Trauma policies can have around 50 specified events for which a payment will be made. The most common of these include:
- Cancer
- Heart Attack
- Stroke
- Coronary artery bypass surgery
- Multiple sclerosis
- Diabetes
The best quality Trauma policies will also pay a percentage of the benefit for the early onset of certain conditions.
Income Protection
Unlike the other types of cover, Income Protection pays a monthly benefit to replace income lost in the event of accident or sickness. As with Trauma insurance, there is a high probability of making an Income Protection claim (~ 1 in 3 working Australian’s will be off work for more than 3 months during their working life), so it’s important to choose quality protection that meets your unique needs.
In general the specified event for Income Protection is full or partial disability. However, there are variables that affect these definitions. For example:
Waiting Period
The Waiting Period of the Income Protection policy determines the amount of time that must pass before a claim can be made. I.e. you will not be considered disabled by the insurance company (and eligible for a payout) until after the waiting period. Common waiting periods include 14, 30, 60 90-days and 2 years and, in general, the shorter the waiting period, the higher the premium.
Benefit Period
The Benefit Period of the Income Protection policy determines the maximum amount of time the insurer will continue to pay you a monthly benefit. Common benefit periods include 2 and 5 years, Age 60 and Age 65.
Getting help
As can be seen from the above, there are many variables which can affect whether you qualify for a life insurance payout under terms of the contract you have with the insurance provider. Therefore, before choosing an insurance policy you should do your homework and make sure you understand exactly when you will be covered. An uninformed decision could see you wasting money on a policy that won’t actually work for you when you need it most.
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.
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