Life insurance is designed to financially protect your loved ones in the event of your death. Coping with the grief of losing a family member is never easy, but knowing that you have protected your loved ones from unnecessary financial burdens can give you peace of mind that they will be cared for should the worst happen. If you have no family as such, you may wish for your life insurance pay-out to help a dependent business partner or close friend instead. Life insurance is not compulsory, but it can help your dependents to cope when you are gone.
Although people generally think of life insurance as just that – insurance which covers your life in the event of death - there are actually several types of life insurance policies: Term Life Insurance is the standard type of life insurance in Australia. Term Life Insurance covers you in the event of your death if you die and pays a specified sum of money to the insured`s beneficiaries or estate as the insured passes while their policy is current. Most standard life insurance policies expire at age 99, but it is best to check the insurers product disclosure statement (PDS) to make sure as each insurer may have slightly different definitions. There is also another form of term life insurance, Select Term Life Insurance which offers to pay a lump sum on the insured`s dealth, terminal illness or total and permanent disability during a selected fixed term 5, 10 or 15 years.
The amount of cover, referred to as the 'sum assured', that your family receive if you die is up to you: how much money will your dependents need if you die? This amount is usually paid as a lump sum or as a series of monthly sums, known as Family Income Benefit. For more details see Payout Options. It is a good idea to seek advice when deciding on the correct amount of cover for you: you do not want your family to be left with too little, nor do you want to pay excessive premiums for unnecessary cover (see Life Insurance Cover).
The cost of a life insurance policy (see Cost of Life Insurance) varies based on the type of insurance and the level of cover received as well as your age, sex, state of health, lifestyle and occupation. The terms and conditions surrounding life insurance are variable and you should shop around and get advice from different providers (see Terms, Conditions & Considerations). Ensuring that you know exactly what cover you are receiving will prevent any surprises later on when a claim is made (see also Making a Claim).
