Life Insurance – Know Your Options

Life Insurance

Life insurance, which is sometimes referred to as life cover or death cover, is a personal insurance policy that pays a lump sum amount to your beneficiaries (those that depend on your paycheck) in case you die prematurely or unexpectedly.


Life insurance is meant to provide financial security when your family needs it the most. It can provide sufficient funds to cover any debts you don’t want to leave behind and may extend to the living expenses of your loved ones in your absence. It could also be used to provide emergency funds for medical, funeral or legal expenses if needed. In addition, a life cover could be used as the vehicle for transferring your wealth to succeeding generations without tax implications.


The cost of life insurance varies depending on various factors including your age, health status and occupation. Higher premiums are charged for individuals that are more likely to die early. For instance, a smoker would probably pay higher premiums than a non-smoker of the same age. Similarly, a pilot would probably need to pay higher premiums than a librarian.

Types of life insurance

There are various forms of life insurance available today, and it important to choose your policy based on your particular needs and goals. A single person or a no-dependents household, for instance, might not require as much cover as a sole breadwinner with little savings. The death benefits from life insurance are usually tax-free, regardless of the specific policy you choose. There are two main types of life insurance policies, each providing the policy holder with a benefit within a defined period of time. The first is term life insurance, which provides a benefit if the policy holder dies within a limited period. The second is whole life insurance, which provides lifetime coverage for the policy holder. This type of policy can be used as form of investment, with a portion of your premiums going towards increasing the cash value of the policy. Although whole life policy options were popular in the past, Australian insurers today rarely offer this type of insurance. Instead, they offer a competitive range of term insurance policies.

Term Insurance Policy

This type of insurance policy only covers you for a specified period ranging from 5 to 35 years. At the end of the term, you would need to renew the policy to keep it active and ensure the cover is available. However, reapplication could be expensive because the premiums may have increased with your age and other risk factors. In addition to death, a term insurance policy may also pay a benefit if the insured is diagnosed with a terminal illness and has less than 12 months to live. The policy is ideal for providing cover during high risk times, such as when your mortgage is high or your children are young. Read: How to Get the Best Self Employed Health Insurance

Unfortunately, Australia is currently facing massive under insurance problems, with most people only seeking insurance for their cars or homes. When assessing whether to take out coverage, it is important to consider what your most vital assets are and determine the financial strain that would result if you were suddenly unable to work or provide a steady income for your family.