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5 Truths About Life Insurance That You Should Know

June 7, 2022 | Financial Planning Insurance

Life insurance is a broad phrase that refers to various personal insurance policies. Many people believe it’s reserved for major life upheavals such as death or becoming fully and permanently incapacitated. However, it can also be beneficial in the short term, such as in the case of illness or accident.

According to research commissioned by TAL, only around half of all Australians hold some form of life insurance, and many are under-insured. 1

Read on to discover our essential life insurance facts and how to find the best insurance financial advice.

What to Know About Life Insurance

#1 Provides A Safety Net In Many Situations

Life insurance can help secure your life and lifestyle by providing payment in the case of death, illness and injury, just the same as protecting your home and contents, car, or health.

Nobody wants to think about being sick or losing the ability to care for the people they need the most. When these things happen though, life insurance can assist reduce some of the financial strain on your and your family.

If someone is diagnosed with a terminal disease or passes away, life insurance can offer a lump sum payout to the life insured’s beneficiaries.

Total and Permanent Disability (TPD), Trauma insurance and Income Protection can help you maintain financial independence whilst you recover from illness or injury or adjust to a life-changing health catastrophe.

#2 It Isn’t Necessary to Spend A Lot of Money

The price of life insurance is determined by various criteria, including the amount and type of coverage as well as your age, gender, health, and lifestyle. The great news is that insurance is often cheaper than many Australians assume. You can tailor your policies and their additional benefits to ensure they remain cost-effective and you can even pay for Life, TPD and Income Protection via your superannuation fund.

There are two types of insurance premiums:

  • Stepped premiums: may be cheaper when the policy is issued but increase as you age for the same level of cover. It pays to do the sums and consider what the total cost of the premiums will be over five years or so. This may be a good option for new business owners or others who don’t have a lot of disposable income but expect to earn more over time.
  • Level premiums: are not affected by your age but are generally more expensive than stepped premiums in the beginning. If you want to control your costs over time and intend to hold the insurance for a long period, a level premium may be less expensive in the long term. Nevertheless, the premiums may be affected by inflation or be adjusted by the insurer.

You may also be able to have a combination of stepped and level premiums based on your circumstances and policy structure. The important thing is to review your premium structures regularly with your adviser.

#3 It’s Important Even For People Who Are Young and Healthy

The life insurance cost is determined by your age, health, gender and lifestyle when purchasing it. The truth is, your health history is probably the best it will ever be in your 20s. You may not have experienced any illnesses or health concerns that could later make you uninsurable.

Insurance company underwriters will typically offer cheaper rates as you’re regarded as being in better health and at a lower risk of making a claim. Therefore, it’s best to lock in favourable insurance terms as a young, healthy person whilst you can – even if you don’t see a need for it yet.

#4 Every Stage of Life Can Benefit From Insurance

People with young families aren’t the only ones who need life insurance. It can also be a valuable safety net at other times, such as purchasing a home or buying into a business.

True, not everyone requires all types of life insurance. If someone is young and debt-free, they may not need insurance that pays out benefits in the event of their death. However, they might wish to consider TPD, Trauma and income protection. This way, if they were to become ill or injured – unable to work for an extended period or ever again, they can maintain financial independence and focus on their recovery.

If someone is older, seeking life insurance advice can help avert a health setback from wreaking havoc on their retirement plans, prevent loved ones from incurring their outstanding debts, or enables them to leave a legacy for their children.

#5 Getting Suitable Life Insurance Is Beneficial 

Most superannuation plans include a level of insurance as a default. Account-holders notice that life insurance premiums are deducted from their amount on their super statements. The good news is that they’re probably protected. They should, however, consider if the insurance offered by their superannuation is sufficient for their needs.

While total and permanent disability (TPD) insurance is also generally accessible, not all super funds offer income protection. Trauma insurance, which protects against catastrophic diseases and injuries, is not authorised inside of super at all

Those with insurance inside of superannuation may need to review and enhance their superannuation coverage or search outside their super fund for their required coverage.

Looking for the best insurance financial advice in Byron Bay?

Life insurance products are complex and need to be tailored to each person and their circumstances to be effective.  Understanding the different types of insurances available, how they work together, how policies differ and how they pay out a claim is essential. Expert advice in this area is crucial to ensure you get appropriate cover.

Always remember to thoroughly read your Insurance policy Policy Disclosure Statement to ensure you understand your policy’s features, benefits, fees, risks and the complaints handling procedure before proceeding with any application.

At Coastal Advice Ballina Byron, we provide tailored financial advice to help our clients achieve their lifestyle goals – this includes both wealth creation and wealth protection. If you need want to start your journey to financial freedom today, call our office or book online to secure your complimentary first meeting!

REFERENCES:

DISCLAIMER: Coastal Advice Group Pty Ltd is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.

(Trading names of Coastal Advice Group Pty Ltd include Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Compass Advice Port Macquarie, Wealth for Life Financial Planning and Coastal Advice Group Brighton/Somerton Park).

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