#### Contents 1. [Types of life insurance](#types-of-life-insurance-2) - [Life cover](#life-cover-3) - [Total and permanent disability (TPD) insurance](#total-and-permanent-disability-tpd-insurance-3) - [Trauma insurance](#trauma-insurance-3) - [Income protection insurance](#income-protection-insurance-3) 2. [Deciding if you need life insurance](#deciding-if-you-need-life-insurance-2) 3. [What to check before you purchase life insurance](#what-to-check-before-you-purchase-life-insurance-2) - [Inclusions and exclusions](#inclusions-and-exclusions-3) - [Information your insurer requires](#information-your-insurer-requires-3) - [Premiums](#premiums-3) - [Waiting period](#waiting-period-3) ![A mother holding her son at the beach.](https://cdn.productreview.com.au/resize/article-image/77a3b463-4fa8-50ed-bb48-ab7bf5787a70?width=826) ## Types of life insurance There are different types of life insurance products that are designed to protect you against different kinds of events. These products work in different ways, so it’s important to read more into the specific product you're looking for. Life insurance products include life cover, total and permanent disability insurance, trauma insurance and income protection insurance. ### Life cover Life cover pays you a lump sum when you die. It’s designed to help those who depend on you pay for bills and other living expenses if you die suddenly, with the money going to the people you nominate as beneficiaries. Life cover is also referred to as ‘term life insurance’, ‘death insurance’ or ‘death cover’. Sometimes, life cover comes with terminal illness cover, which pays a lump sum if you’re diagnosed with a terminal illness. ### Total and permanent disability (TPD) insurance Total and permanent disability (TPD) insurance pays a lump sum if you suffer a permanent injury or illness that makes you unlikely to return to work in your usual occupation or any occupation you’re qualified for. The payout can be used however you want, but is designed to help financially support you and your family to pay for medical and rehabilitation costs and living expenses. Each insurer will have a different definition of what total and permanent disability means. TPD insurance either covers ‘any occupation’ or just your ‘own occupation’. - **Own occupation cover:** you’re unable to work again in the job you worked before your disability. This type of cover usually costs more and is generally only available outside of your super fund. - **Any occupation cover:** you’re unable to work again in any job that’s relevant to your education, training or experience. This type of cover costs less but has a higher claim threshold and is less likely to pay out. ### Trauma insurance Trauma insurance pays a lump sum if you suffer a critical illness or a serious injury, such as a heart condition, severe head injury or stroke. This type of insurance doesn’t cover mental health conditions. Depending on the cover, it can be used to pay for living costs, medical costs, rehabilitation, nursing, changes to housing and paying back debt. This type of insurance is also called ‘critical illness’ or ‘recovery insurance’. ### Income protection insurance Income protection insurance pays a portion of your income if you cannot work due to illness or injury. It provides regular monthly payments to help you pay the bills and ease financial pressure until you’re back on your feet. If you’re unable to work due to disability, income protection insurance pays: - up to 90% of your pre-tax income in the first six months, and - up to 70% of your pre-tax income for a set period of time after six months. Your cover is based on your annual earnings in the 12 months prior to your illness or injury. Most policies will let you choose your sum insured (the percentage of your salary before tax and excluding super), but the higher the sum insured, the more you’ll pay in premiums. ## Deciding if you need life insurance Whether or not you take out a life insurance policy can depend on a number of factors. Think about: - how much income you and your family or dependants would need if you could no longer work. - any debt you have, such as a mortgage, that you’ll need to make repayments on even if you cannot work. - whether you’re self-employed or a small business owner who may not have sick or annual leave (in this case, taking out income protection insurance may make a lot of sense). - if you have private health insurance that can contribute to some medical costs. - other types of insurance you have - for example, you may decide against buying trauma insurance if you already have income protection insurance, total and permanent diability insurance, or another type of insurance that can help replace lost income. - available support from family or friends if something unexpected were to happen. ## What to check before you purchase life insurance #### Check if your super fund offers insurance Before you set about choosing a life insurance policy that works for you, check whether you already have life insurance through your super so you’re not paying double. Most super funds offer life insurance, total and permanent disability insurance and income protection insurance for their members, however these are often opt-in. Getting insurance through your super fund may mean cheaper premiums, fewer required health checks and may make it easier to pay, but can also mean limited cover and reduced super, as insurance premiums are deducted from your super balance. ### Inclusions and exclusions It’s important to read the Product Disclosure Statement (PDS) carefully so you know exactly what is and isn’t covered in your policy. For example, some income protection insurance providers won’t pay if a claim arises: - because of an intentional or self-inflicted act. - because of normal and uncomplicated pregnancy, miscarriage or childbirth. - from deregistration, disqualification or restriction which prevents you from doing your work. - as a result of participation in a criminal act. Each policy is different, so make sure you read the fine print. ### Information your insurer requires Most of the time, an insurer will ask you questions when you purchase life insurance. An insurance provider may ask for your: - age. - profession. - medical history. - family history (such as a history of disease). - lifestyle (such as activity levels or if you’re a smoker). - sports or hobbies deemed high risk, such as base jumping. This information will help the insurer decide whether to insure you, how much your premiums will be, and what terms and conditions to attach to your policy. It’s important to answer questions fully and honestly, as providing misleading answers could cause an insurer to cancel your cover or decline a claim you make. If an insurer doesn’t ask for your medical history, lifestyle, or high risk activities, it may mean the insurance policy has more exclusions, so ensure you read the PDS carefully. ### Premiums You can generally choose to pay for life insurance with either: - **stepped premiums,** which are when the premium increases every year as you get older, but it starts off lower. - **level premiums,** which start higher than stepped premiums, but changes to the cost aren’t based on your age, so increases usually happen more slowly. What you choose can impact the cost of your life insurance premiums when you purchase your cover and in the future. Regardless of how you choose to pay for life insurance, premiums aren’t set in stone and can change every year. ### Waiting period The waiting period is the number of days between the event that results in you making a claim (such as an injury or medical diagnosis) and when you start receiving benefits. Waiting periods vary, but many policies offer waiting periods of 30 days, 60 days or 90 days. The shorter your waiting period, the higher your premiums will be. Disclaimer: The information on this website is for general information only. It should not be taken as constituting professional advice from the website owner - ProductReview.com.au. ProductReview.com.au is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. ProductReview.com.au is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. { "@context": "https://schema.org", "@type": "Article", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://www.productreview.com.au/c/life-insurance" }, "headline": "Best Life Insurance", "description": "Life insurance helps financially protect you and those you love if something unexpected happens. Learn about life cover, total and permanent disability insurance, trauma insurance and income protection.", "image": "https://cdn.productreview.com.au/resize/article-image/77a3b463-4fa8-50ed-bb48-ab7bf5787a70", "author": { "@type": "Person", "name": "Clara Von Dinklage" }, "publisher": { "@type": "Organization", "name": "ProductReview.com.au", "logo": { "@type": "ImageObject", "url": "https://cdn.productreview.com.au/assets/public/og_logo_1a8a64.png" } }, "datePublished": "2023-10-18", "dateModified": "2023-10-18" }

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