Buyers who are advised to purchase life insurance plans, often wonder why purchase life covers, what benefits can this type of cover offer me and why isn’t workers compensation insurance enough?
Before answering these questions, it is important to understand what life insurance is, what life insurance can do for you and how it works. Listed below are answers to questions most buyer have about term life covers ad other types of life covers.
What is Life Insurance?
- Life covers comprise of the term death cover, income protection cover, trauma insurance cover, personal accident cover and the total permanent disability cover. Each of these covers offers a different set of benefits and perks to policy holders.
- Term life covers offer 1 payout to the beneficiaries of the policy holder when they file an eligible claim. Term life insurance plans or term death covers are offered for a fixed number of years such as 10 years, 20 years or 30 years.
- Income insurance covers offer monthly payments to the policy holder when he files a claim. Income covers are offered for a fixed number of years such as 5 years, 10 years or 20 years. The benefit period can range from 2 year to 5 years or at times 6 years.
- Trauma insurance and TPD cover offer one payout to the policy holder when he files a claim.
- Personal accident insurance plans may offer one or more payouts to the policy holder depending on the nature of the accident, the severity of the injury and the impact the injury has had on the policy holder’s life.
What Can Life Covers Do For You?
- Term death covers can provide you with peace of mind since these covers protect your loved ones financially when you are not around to take care of their important needs. Term life covers will provide your beneficiaries with the pre-decided payout once they file a successful claim that is supported by the required documents.
- Income insurance covers can provide you with peace of mind since these covers can protect you when you are unable to work due to either an illness or injury. Majority of the income covers offered to Australian buyers offer a maximum of 75% of the insured person’s income towards payouts. This means that, when you are temporarily ill or injured, you will receive a large part of your income from the insurer until you are well enough to work again.
- Total and permanent disability insurance plans and personal accident insurance plans can ensure that you get medical help or financial support when you are injured.
- Trauma insurance plans can ensure that you have enough money to take care of your financial affairs when you are diagnosed with a terminal or critical illness. Trauma insurance plans can also ensure that you have enough money to stay comfortable when you are diagnosed with cancer, heart problems or any other serious health issues.
How Do Term Life Covers Work?
- If the policy has a waiting period then the policy holder can only file a claim after this pre-decided waiting period comes to an end. If the policy has a benefit period, then the policy holder can only file a claim when this pre-decided period is active. All claims can only be filed if the premiums are paid on time, if the eligibility criteria is met and if the policy is still active at the time of filing the claim.
- If the policy holder is alive at the time of filing the claim then he will have to file an official claim supported with some necessary documents in order to enjoy the benefits offered to him. If the policy holder has passed away and the beneficiaries are filing the claim for him, then they will have to file a death claim along with supported documents to get the compensation payout.
Why Purchase Life Covers?
- You should purchase a term life cover if you are responsible for the welfare of one or more dependants. You should purchase an income protection plan if you want to ensure your financial stability even when you are ill, injured or cannot work. These plans can protect you from income loss and can ensure that financial stability of your family as well. Income covers and term life covers are a must for people who are the main bread winners of the house and have one or more dependants. Elderly parents, young children, pets and people who cannot take care of themselves are considered as dependants.
- Personal insurance plans give buyers choice. These covers not only allow the buyer to choose how he wants to pay the premiums but when as well. Buyers may also be able to select the term of the plan, conditions of the plan, the waiting period, the benefit period and if they want any additional perks. Personal life insurance plans ensure that the buyer is in control of both his plan and his life.
- Buyers who purchase life covers can choose between stepped or levelled premiums. Stepped premiums ensure that the policy holder can enjoy significantly lower premiums at first; however as the policy holder gets older he is required to pay higher premiums and these premiums keep on increasing until the policy is over. Levelled premiums ensure that the buyer pays a fixed pre-decided period til the policy is active. Some insurers may offer a new and improved type of premium plan known as blended premiums. Blended premiums are usually offered with term life covers. Blended premiums offer the benefits of both levelled and stepped premiums.
Why is Workers Compensation Insurance Not Enough?
Workers compensation insurance does not offer maximum compensation payouts and this type of insurance plan does not offer compensation payouts if the employee is injured elsewhere such as while on vacation, at home or while travelling to and fro from work. While employers are required by the law to provide workers compensation insurance to all employees, this insurance plan is not enough as a standalone life insurance plan.