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Term life insurance
What is term life insurance? Term life cover is the insurance that everyone traditionally recognises as Life Insurance. It pays a lump sum upon the death of the life insured. There is no savings component to term life insurance, therefore, the insurance itself is typically more cost-effective than a savings type of insurance and are rarely offered in Australia today.
Term life insurance is a policy that will pay a specified sum of money to the estate of the insured upon the death of the insured. In exchange, the insured person agrees to make regular payments of premiums (monthly, half yearly or yearly) to the insurance company. The life policy is subject to strict limitations, exclusions, terms and conditions. It is therefore extremely important for you to know the policies limitation, exclusions, terms and conditions before you sign the contract. You should seek advice from a personal risk specialist before signing any policy document..
Do you need this type of insurance?
Have you ever thought how your
family would cope financially if you were to pass
away unexpectedly?
You should regularly review your family's financial situation, in conjunction with a personal risk adviser, to ensure that you are appropriately insured. The greater your financial obligations and the more dependants you have, the more
term life insurance you may need to protect your assets and your family's financial security. Obligations which may need to be considered are your mortgage, paying for your children’s future education, settlement of personal debts, funeral expenses and your family's future living expenses..
How much term life insurance cover
do I need?
The purpose of
term life insurance is to provide your dependents with a sum of money sufficient to pay out your debts and/or to provide an income sufficient to support your family for a period of time - usually until your children are 18 years old. As everyone's situation is different, the level of cover required will vary. Most
risk advisors will recommend that you have term life
insurance cover equivalent to a minimum of 10 times your average annual income.
The key areas to think about when calculating how much term life insurance you need are your levels of current "Debt" (eg. credit cards, personal loans), "Income" (a capital value for your family to invest and receive income), "Mortgage" (any mortgage debt that you have) and "Expenses" (your family's annual living expenses are met).
Term life insurance is particularly important if you have a high level of debt such as a home mortgage or investment loans. If you were to pass away, would your loved ones be able to continue to service your outstanding debt, or even pay them off outright?
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How
do you choose the right term life insurance policy?
It is best to talk to a personal risk
specialist who has access to a wide range of
competitive life insurance products. They have the
experience and expertise to guide you in choosing the
right product for your particular situation and
budget. Premiums vary depending on age and health
history. Your advisor can provide a guide, but your
application will need to be formally assessed by the
life insurer before your final premium is known. You
should also do some research on the proposed company
whose policy you will be taking up. You will need to
be comfortable in investing these payments into a
reputable, stable, financially sound company. xLife only uses the very best product research available in Australia. You should aim to be covered by an insurer with a 'AAA' rating. It is best to talk to a risk insurance advisor who.
Further
information
Term life insurance is an important and integral
part of a comprehensive and sound financial plan.
When you sign up for term life insurance it is also best to review your Will ensuring your Will is current i.e. no older than 3 years old. The making of a Will ensures that your assets pass to the people of your choice. If you do not have a Will, your estate will be subject to state intestacy laws. This legislation may not be consistent with your wishes. Please refer to our articles on Wills & Estate Planning.
Total & Permanent Disability (TPD) Cover
Total & Permanent Disability cover provides a lump sum in the event that the person insured becomes totally or permanently disabled. It is designed to help discharge any outstanding loans you might have and also help with your ongoing living expenses while you are disabled. This cover is usually combined with Term Life cover as it is relatively inexpensive in most cases. |
