Get life insurance in Australia – Why Term Insurance?
Term insurance pays a ‘capital' type one-off amount. It doesn't bring you back and it doesn't stop your family grieving, but it does give them lifestyle choices after you've gone.
If you don't have term insurance then you will leave your spouse without your regular income to carry the burden of your home mortgage and other debts. Your children may not have the education you hoped for. Your family may have a very hard life and could even end up living in poverty.
Term Insurance is an innocuous sounding name for death cover insurance. So how can insurance offer any protection against an event that is 100% certain to happen eventually?
Term insurance relates to premature death. That means death must occur before the policy expires. Policies usually expire at age 65 and sometimes up to 70 years. Hence the name ‘term insurance' – you are insured for a specific term and then the policy expires.
The cause of death is largely irrelevant. Exclusions vary with each policy but there is a particular exclusion, common to all Australian policies. That is, death as a result of a self-inflicted act is generally excluded for the first 13 months.
The way this type of policy works is that if you are the policy owner and the person insured, and you die before the policy expiry date (65, 70, or whatever age the policy states), the beneficiary you nominated on the application form will receive the lump sum payment.
Whilst it is common for the nominated beneficiary to be a spouse, partner or family member, it can be anyone at all. A beneficiary nomination can be changed in writing at any time.
There are certain business and family circumstances where it is appropriate for the policy owner and the person insured to be different people (with mutual written consent). In theses cases, all claim payments are paid to the policy owner and there is no provision for the person insured to nominate other beneficiaries. The amount of the claim payment will be whatever amount you applied for on the application form, usually indexed for inflation each year. If you haven't died before the policy expiry date then the policy ceases to exist and you are no longer insured.
Term insurance is a great value-for-money starting point for anyone seeking financial protection. Everyone can afford term insurance so there is no reason why every Australian family can't have at least a basic level of cover.
The amount of basic level cover required should not be dictated by the low levels of automatic cover found in most superannuation funds. Basic level cover varies depending on individual circumstances. It is whatever amount of financial protection is appropriate to an individual or family's needs.
Most people don't realize that an insurance claim payout can be used for any purpose. It can pay off mortgages and other debts, finance children's education, buy a car, buy a holiday or can be invested by the beneficiary to live on.
For advice and strategies on term life insurance, income protection, and critical illness insurance visit:
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