Types of Life Insurance in Australia
- The life covers available in Australia can be divided into two categories. The first category consist of term life insurance and income covers and the second category consist of trauma insurance, tpd insurance, or total and permanent disability, personal accident cover plans and funeral insurance plans. All the plans mentioned above are types of personal insurance plans that are offered to permanent Australian residents and Australian citizens.
- Each of the plans offered to buyers in Australia, have their own sets of benefits and limitations. For instance, life insurance plans give peace of mind to the buyer and his family along with a pre-decided payment if the buyer passes away while the policy is active due to reasons such as a natural death, an accident or illness. The limitations of life covers include, compensation payments are not given for suicide cases, compensation payments are given only when a successful claim is filed and there may be tax implications of getting a large lump sum compensation payment from the insurer.
- Income covers offer both peace of mind and a pre-decided or variable monthly payout to the policy holder if he cannot work temporarily. The limitations of this type of plan include compensation payouts are given only for illness, injury while the benefit period is active and compensation payouts are not given for loss of job.
- Total and permanent disability plans offer financial support to the insured person when he loses function of 1 or more limbs, when he loses function of 1 or both eyes or suffer other injuries that impact his life significantly. The compensation payment will be given for any of the problems mentioned above that have been caused by illness or injury.
- Trauma insurance plans offer financial support to the insured person when he is diagnosed with a life threatening illness such as stroke, cancer, certain serious mental illnesses or critical heart problems. Limitations of this plan include that, the compensation payment is not given for injuries.
- Funeral insurance plans offer funeral expenses to the family of the deceased policy holder when they need to arrange for a funeral arrangement.
- Personal accident insurance offers compensation payments to the insured person if he is injured in an accident, loses function or his limbs or suffers loss of income due to this accident. Limitations of this plan include, illnesses are not covered, self inflicted injuries are not covered and the compensation payment is only provided when the injuries are a result of an accident.
Cost of Life Insurance in Australia
- The type of plan you purchase and the cover limit will be the main factors in determining the cost of the policy; however a few other factors such as your age, gender, occupation and habits will also determine how much you pay the insurer towards premiums. Life covers that are offered for a fixed term and that offer a lump sum compensation payment on your death can be purchased for as less as $15 a month if you are a non smoking adult with a white collar job. The price of the policy will increase if you smoke, if you are a blue collar professional or if you indulge in any risky behaviour such as driving a sports car or sports bike.
- There are a few ways you can ensure that you get a good policy within your budget. These ways include but are not limited to, choosing an insurer or insurance agent that offers deals suitable for you, choosing a method of purchase that allows you to buy the best plan you can afford by comparing plans before purchase and opting only for the benefits you need. While it is always a good idea to purchase a plan with maximum benefits, this can increase the cost of the plan significantly hence, you should get the help of an insurance advisor to understand your insurance needs so that you can purchase a plan that can be customised to suit your needs. Choosing a plan with a shorter benefit period and a longer waiting period along with limited paid benefits are a few other ways to reduce the total cost of life insurance plans.
Purchasing Life Insurance in Australia
- Purchasing life covers in Australia is a relatively simple task and buyers have three options to purchase personal insurance plans. The first option is to purchase life covers directly from insurers, the second option is to purchase life covers from insurance agents or comparison websites and the third option is to purchase life covers from their superannuation fund.
- Each option has its own benefit, for instance purchasing a life cover from the insurer is a hassle free task provided the buyer knows exactly which cover he wants. Purchasing a life cover from an insurance agent allows the buyer to use various online tools to compare plans, select the plan he wants and purchase for the plan online. Purchasing a plan from a superfund also has various benefits, such as these plans have a shorter waiting period, longer benefit period and offer additional perks.
- Each of the options mentioned above also has its own limitations. For instance, when you purchase an insurance plan directly from an insurer, you may not be eligible to get some discounts that insurance agents offer and you may not be able to ask for multiple quotes from the insurer. Purchasing an insurance plan may be challenging for those individuals; who have limited computed knowledge and do not know how to compare plans online. Purchasing an insurance plan from superannuation funds may imply that the buyer has to pay higher taxes when he gets the compensation payment and that the buyer has to meet different eligibility criteria to get the claims payment. The best way to know which purchasing method is ideal for you is to understand your own insurance needs, try to use the comparison websites or ask the super fund manager regarding eligibility criteria and claim compensation tax laws before you purchase a plan.
Related reading about life insurance
Life insurance for the self-employed
Facts about Life Insurance in Australia
The Right Life Insurance Decision in Retirement
Trauma Insurance vs Health Insurance
Debunking Life Insurance and Income Protection Myths