Life Insurance

Life insurance is a promise of reimbursement for a specified amount of money, following a death, paid to your beneficiary. It is something that should be seriously considered if you have any form of large debt such as a mortgage (as debt can be inherited too), need to replace lost income upon a spouse's death, have a growing family, own a business, or just want to ensure that there is something for those you have left behind.

A policy is a written contract, or certificate of insurance that describes the insurance, the person insured, the value of the insurance and the guidelines for claim.

There are several types of insurance that can form part of life insurance, and that can be taken out as part of a package, or on their own. Such insurances include:

Income Protection

Income protection is an insurance policy that provides regular sums of money on a specified basis ie: weekly, fortnightly etc, up to your retirement date, and that is paid in the event that you are not able to work and earn money as a result of sickness, accident, or disability.

Income protection is particularly important for people who are self employed.

The amount of income protection insurance you will need will be determined by the amount of income you require to pay your weekly expenses, address your financial responsibilities and maintain the lifestyle you desire. Generally, income protection provides for approximately 75% of your current income.

When considering income protection, it is suggested that you review the following:

• ask key questions such as what's covered and what's not covered, how much will I be paid after a claim, when and how will the insurance premiums be increased ie: yearly by percentage;
• what is the waiting period before you will start to receive payments, and how long are the benefits payed for;
• is there any lump sum payout payments in the event of permanent disability;
• consider purchasing an index-linked premium and cover, which will increase with inflation, as opposed to remaining at the value of the date it was purchased;
• consider a non-cancellable policy. In some cases, insurance companies can request regular health checks, or review your insurable worth (how much of a liability you may be for insurance) at each renewal, with a view to raising your insurance premiums, or even refusing to continue the income protection cover. A non-cancellable policy can prevent that from occurring;
• does the policy have offset clauses, which allows the insurer to reduce your payments if you receive other income such as sick leave, Centrelink benefits etc;

Critical Illness Insurance

Critical illness insurance is an insurance policy that provides a lump sum payment in the event of the diagnosis of a critical illness. Such critical illnesses can include:

• cancer;
• heart conditions;
• stroke;
• multiple sclerosis;
• Parkinson's disease;
• major organ failure such as kidney, lung or liver;

 just to name a few.

When considering critical illness protection, it is important to note that the majority of policies will not pay out if the diagnosis occurs within a specified period ie: three months, six months etc, from the commencement of the policy, or an increase in the policy.

Life Insurance

Life insurance is a promise of reimbursement for a specified amount of money, following a death, paid to your beneficiary.

Given that the majority of Australians live within a nuclear unit of some form, whether it is as a family, couple, partnership etc their ability to earn income is a significant asset to that nuclear unit. Life insurance helps replace lost income in the event of your premature death.

The proceeds of an insurance payment may be used for such things as:

• funeral expenses;
• pay living expenses and maintain a standard of living for the beneficiary;
• pay off a mortgage, loan, or other debts;
• create a fund for children's education;

Life insurance is an important item to have if you want to ensure that you do not leave any financial burden on those left behind, and is something that is often overlooked.

When determining which insurance cover you require and how much cover is best for you, it is important to consider such things as:

• whether you are single or married;
• whether you have children;
• financial liabilities such as mortgages, loans, ongoing financial obligations;
• assets and cash savings;
• your current lifestyle, ie: how much money would you require to maintain your current standard of living;

For further advice on the types of insurance that are available and that are suitable for your needs, it is recommended that you speak with a certified insurance professional. 

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