What is Term Life Insurance?
Life Insurance in Australia is also known as term life insurance. As the name suggests, Term Life Insurance has a limited term, usually to age 99. You will need to check the various offers available as some Australian Life Insurance companies cease Life Insurance benefits after 10 years or less. Life Insurance protection provides a lump sum to your family in the event of death or for you in the event of a terminal illness. Life Insurance can be purchased between the ages of 15 and 79.
Whole of Life Insurance is no longer sold in Australia today although it usually consisted of an insurance premium and an investment component. These policies could last the whole of your life, although premiums were considerably more expensive and now term life insurance is the most popular type of Life Insurance in Australia today.
Term Life Insurance will help protect the policy holder’s family by providing a lump sum in the event of a death, which could be used to meet the following needs:
- The family’s ongoing income needs
- Mortgage and other outstanding loans that you can pay off
- Children’s education costs
- Life Insurance is really Income Protection Insurance for the family
One common misconception is that the Life Insurance companies are concerned how you use the benefits received… that’s up to you. But remember there is only one payout so make sure you get advice on what are the best ways to use the benefit and or reduce any tax that may need to be paid on the Life Insurance payout.
How much Life Insurance cover does my family need?
Everybody’s situation is different. We have provided a basic lump sum life insurance calculator on our web site to help you determine the correct amount you may need. But first, we recommended you pay off all your outstanding debts as a starting point.
Then work out what your daily living expenses are and remember to include gifts and a vacation every now and then. You still need to live! But don’t forget children’s education costs and/or funeral expenses.
For a complete examination of what you need, contact one of our advisers today who will be more than happy to help you calculate your sum insured.
Have a look at our guide on Understanding Insurance if you need to download this type of information.
Who should own my Life Insurance policy?
Again that really depends on your situation. Remember this can be very complex so you may prefer to seek out professional help from a Financial Planner and/or your Lawyer. CCA Financial Planners are experienced advisers and we will consider these 6 major issues when recommending who owns your Life Insurance policy.
Who do you want to receive the money; your family or the bank?
Your tax structure; are you an employee or self employed?
Do you have an existing superannuation fund, is this an industry fund, retail master trust or a self managed super fund?
Do you have any previous relationships we need to consider?
Do you need 100% certainty as to who the money needs to go to?
How will your life insurance benefit be taxed? It depends on how you set up the policy.
This really forms part of your estate planning, and we have prepared an information guide on Understanding Estate Planning and our Understanding Insurance series for you to download.
How much does Life Insurance cost?
It really depends on various factors, some of these are as follows:
What is your age?
What is your gender?
Are you a smoker or non-smoker?
How much cover do you need?
Your existing health
How long do you want your Life Insurance to last?
CCA Planners will consider these 6 major components of your situation and help you tailor a Life Insurance quote to your needs.