Life insurance: Protecting What’s Most Important
Life insurance offers the peace of mind of knowing your family will be financially protected should the unthinkable happen.
With so much riding on your policy coverage, here’s a closer look at the different types of life insurance, and how they work to protect your family from the unexpected.
What is life insurance?
Life insurance is designed to provide a source of income for your children and other dependants should you die or become disabled.
Most life insurance policies pay a lump sum, which allows your family to continue meeting important financial obligations, including:
- Mortgage, rent and car payments.
- Everyday living expenses and bills.
- Funeral and estate-related costs.
- Education expenses for your children.
- Any outstanding debts.
So, why life insurance? Because losing a loved one or watching them suffer through illness is distressing enough without adding financial strain to the mix.
What are the different types of life insurance?
There are four main types of life insurance designed to cover a range of different scenarios:
- Life insurance. Term life insurance (or death cover) is replacement income for your spouse and dependants. It pays a pre-agreed amount in a lump sum at the time of death.
- Trauma cover. This is insurance for critical illnesses, such as cancer, strokes and heart attacks. It is paid in a lump sum to cover medical expenses and ongoing recovery and rehabilitation costs.
- Total & permanent disability (TPD). This covers you for permanent loss of work due to serious illness or injury. It is paid in a lump sum.
- Income protection. This provides up to 75 per cent of your regular work income due to illness or injury for a specified period. Unlike other types of life insurance, income protection is paid in regular monthly instalments.
The right life insurance policy for you depends on your income, age and family situation. Use the iSelect Life Insurance Calculator to work out how much cover you might need.
Private health insurance vs trauma cover – what’s the difference?
While your private health insurance may cover hospital stays and general treatment, it’s not meant to provide coverage for long-term after-care resulting from serious illnesses. Nor can it replace lost income resulting from critical illness.
Trauma insurance is designed to meet that gap by covering the long-term costs associated with serious illness, including:
- Rehabilitation services.
- Medical equipment and home modifications.
- Ongoing therapy and nursing care.
- Lost work or business income due to illness.
- Debt repayments and living expenses.
It can provide welcome financial relief during a difficult time, giving you one less thing to worry about.
How will my health affect my life insurance application?
Many people mistakenly believe that if they have a pre-existing medical condition, they won’t qualify for life insurance. But this isn’t necessarily true.
In some cases, you may still be able to get life insurance by paying higher premiums. This is known as “premium loading”, and takes into account the higher risk for the insurer. While you may have to pay more, the alternative is having no cover at all, which can leave you and your family financially exposed if disaster strikes.
Alternatively, the insurer may add an “exclusion” to the policy, which means they won’t pay out if the pre-existing condition is the cause of death. In this case, it’s important to review and compare different policies to find one that best meets your needs.
Are life insurance premiums tax deductible?
Income protection premiums, when held outside of superannuation, are generally a tax-deductible expense.
You may be eligible for a tax rebate off your life, TPD or income protection premiums if your insurance is funded by partial rollover from a participating superannuation fund.
As every person’s situation is unique, be sure to seek advice from your taxation accountant.
How can I find the best life insurance policy for me?
If you’re searching for the right life insurance policy to keep you and your family financially secure, we can help.
We compare insurance products from a range of Australia’s leading life insurers and can get you fitted with a life, trauma, TPD or income protection policy for your needs.
Best of all, it won’t cost you a cent.
Start comparing life insurance policies now, or call 13 19 20 and let us help you find a policy today.
We do not compare all products in the market. Not all products are available at all times.
iSelect Life Pty Ltd – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice we give you, having regard to your personal situation, before acting on our advice or purchasing any product. You should consider iSelect’s Financial Services Guide which provides information about our services and your rights as a client of iSelect. We receive commission for each product sold.