How To Compare Life Insurance Policies In Australia
Life insurance pays your estate or beneficiaries a lump sum should you die
. However purchasing a life insurance policy in Australia is different compared to overseas life insurance policies, such as those from the U.S. The Australian life insurance products are structured differently, and as a result it can make online research difficult to accomplish. There are a number of questions you should ask yourself when thinking about purchasing life insurance in Australia. These are things like:
which life insurance company to go with
which life insurance policy product to select
how much life insurance cover you need
if you also need TPD (total and permanent disability insurance) and trauma insurance or income protection
Lets delve into each point a little more:
1. Compare the top life insurance companies in Australia
There are a number of life insurance companies in Australia, and some of these companies operate world-wide. One of the best ways to check if a life insurance company is trustworthy is to check their rating. To ensure your life insurance policy is with a top company, you should choose a company with a AA or AAA rating.
To make things easier for you, we have listed the top life insurance companies operating in Australia:
AIA (formerly AIG)
2. Compare the different types of life insurance policies
In Australia the main type of life insurance product available is Term Life Insurance. This type of insurance typically covers you up to age 99 or 100. However some select life insurance companies also offer 5, 10 or 15 year term life insurance policies.
Within term life insurance policies, you have the option of choosing to pay either stepped or level premiums. The most common option is stepped premiums, where the cost of your premiums increases with your age. The other option is level premiums, where the premiums stay the same to a certain age, usually up to age 65.
It should be noted that the choice of stepped or level premiums depends on what suits your particular situation. The cost difference between stepped and level premiums of each policy has its pros and cons. If you are in doubt be sure to speak to your financial adviser.
3. Calculate how much life insurance cover you need
As a general rule of thumb, the average Australian would need approximately ten times their annual income. If you have additional loans or mortgages for residential or commercial properties, you may like to factor these in as well.
If you have any dependents like children, or elderly parents to care for, take a minute to consider what would happen to them should you pass away. There are childcare, nanny, school and possible hospice-care costs that could add up. If there is a significant monetary value in having your loved ones taken care of, you should factor in these costs too.
4. Do you also need TPD Insurance?
Many life insurance companies bundle their TPD insurance with their life insurance policies. Purchasing a bundled policy can save you money, compared to purchasing a two different policies. However, once a claim is made on a bundled policy, you may not be able to make a second claim later on. An example of this is a person with a bundled policy of $500,000 for both life insurance and TPD insurance. If they make a claim due to becoming totally and permanently disabled, when they die, another claim can usually not be made. This is because the TPD claim reduces the life insurance sum insured.
These bundled policies may or may not have a sufficient level of cover to claim for both TPD insurance and life insurance. If you are in doubt or have any additional questions please contact your financial adviser. A qualified financial adviser can help you decide on the above factors, and ultimately which life insurance policy would best suit your situation.
by: Hilary Briss
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