Are you scared of life insurance? Don’t be!May 8th, 2013 | Posted by in Articles
Just the words “life insurance” can make many of us want to run for the exits! You might be picturing a grim insurance salesman dressed like an undertaker, predicting only doom and gloom. It’s perfectly understandable to want to put off thinking about insurance for yourself, but you might not know that there are actually a number of different policy types available, with many specifically designed to support you through recovery from serious life-changing events such as illness and serious injury.
Temporary vs. permanent
There are two basic classes of life insurance. Permanent life insurance is active until the policy matures or is surrendered by the holder. It accumulates cash value over time, which the insured party can withdraw or borrow against.
Temporary, or term life insurance covers you for a fixed, specified period and can be renewed as needed, usually on a 12 month basis. It doesn’t accumulate value over time but offers much greater flexibility, making it the more popular type of policy.
Types of life insurance available
Also known as critical or major illness insurance, this offers a lump sum payment on the diagnosis of a serious medical condition. It can be a wise choice if you are already dealing with significant debts, such as a home mortgage, and don’t qualify for income protection.
While most trauma policies cover a wide range of illnesses, as well as the most common conditions such as heart attack and cancer, we recommend you check the product disclosure document (PDS) to find out exactly what’s included.
This is a policy that covers both partners in a relationship, and can be a good choice because as well as providing comprehensive protection, it can also include a discount of 5 to 10% per person compared to taking out individual policies.
Generally, the partner with the higher income is insured for the greater amount, but couples insurance can also help cover the costs associated with the responsibilities of a stay-at-home parent, such as childcare and home/garden maintenance.
Family life insurance is suited for the working parent who wants continuing financial security for his or her family after their death or on the diagnosis of a major illness. Similarly to couples insurance, it can also be used to cover the contributions of the non-working parent, in their role as primary family caregiver.
It can be one of the most cost-effective options while still ensuring that all basic family needs, including food, accommodation and education, will be looked after.
This is where a large group of individuals (in most cases, employees within an organisation) are able to purchase life insurance at wholesale rates. Working in effect as a combined group policy, it offers a number of benefits beyond individual cost savings. These include little to no medical underwriting and simplified administration.
This is an excellent choice for companies that may not have the financial resources to support employees through extended absence due to illness.
How do you get the right advice?
As you can see, many types of life insurance are extremely similar in what they offer, and choosing exactly the right policy can be a daunting task if you decide to do it on your own – possibly the scariest part of all! Wealth Smart can help with an objective comparison of a wide range of products from leading providers, so you can rest assured you’ve made the best choice.
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