Life Insurance Types – Changes In Australia’s Insurance Market
Life insurance types is meant to offer financial protection to your beneficiaries, that is, those that depend on your paycheck, in case you pass away prematurely or unexpectedly.
Life insurance protection comes in various forms, with different policies available. Although the death benefit amounts may be the same, the duration, costs and duration vary across different policies.
Different people have different circumstances and budgets, so it is important to select a life insurance product that adequately meets your needs.
Term Life Insurance
This is the most common type of life insurance available in Australia. This is because it is cost-effective, easily accessible and suits most people and situations. Term life insurance is surprisingly affordable, particularly for individuals who are young and reasonably healthy click here to know more. As long as you pay your premiums consistently, your cover is automatically renewed annually without needing further evidence of good health. In addition, you might even be able to request for an automatic increase in the sum insured to keep up with inflation.
Permanent Life Insurance
This form of life insurance includes a savings component or ‘cash value’. As such, the premium rates are generally higher than those for term life insurance. However, it offers risk protection for your entire life, so there will definitely be a payout from the insurance company. In addition, you can access your cash value when you need it to meet some other financial need, or use it as collateral for a loan, buy a home or pay for your kids’ education. However, permanent life insurance is no longer available in Australia; it has been superseded by the more contemporary term life insurance. Fortunately, term life insurance can be maintained until you reach 99 years of age, offering life-long risk protection.
Variable Life Insurance
This is another form or permanent life insurance, but with flexible terms and investment options. This flexibility gives you the opportunity to modify the death benefit within a given limit, adjust the amount and timing of your premiums, and choose how the cash value is divided among the funding options available. However, the cash value and death benefit may fluctuate depending on the funding option chosen or the performance of your underlying investments. Similar to permanent insurance, variable life insurance is no longer available in Australia. Read: Why Should You Buy Life Insurance?
Whole Life Insurance
This is yet another version of permanent life insurance that is no longer available in Australia. It combines life insurance with an investment fund, so that a portion of your premiums is used to fund your benefit and the rest allocated to building the cash value of your policy. It was particularly popular in the 70s and 80s in Australia because it combined lifelong insurance with level premiums and a guaranteed death benefit. With whole life insurance, there was a guaranteed annual increase in the cash value, dividend earnings were a possibility, and the insured could borrow against the cash value while keeping the policy active.