Category

Insurance

Protecting for your loved ones

Protecting for your loved ones

Financial protection for your loved ones when you die

Sudden death can place financial stress on those who depend on you. If this happens, life cover can help them pay the bills and other living expenses.

What is life cover?

Life cover is also called ‘term life insurance’ or ‘death cover’. It pays a lump sum amount of money when you die. The money goes to the people you nominate as beneficiaries on the policy. If you haven’t named a beneficiary, the super trustee or your estate decides where the money goes.

Life cover may also come with terminal illness cover. This pays a lump sum if you’re diagnosed with a terminal illness with a limited life expectancy.

Accidental death insurance is different from life cover. It will only payout if you die from an accident. It will not provide cover if you die from an illness, disease or suicide. This type of cover often has a lot of exclusions.

To understand what’s covered under a policy and the exclusions, read the Product Disclosure Statement (PDS).

Decide if you need life cover

If you have a partner or dependents, life insurance can help repay debt and cover living costs if you die.

If you don’t have a partner or people who depend on you financially, you may not need life cover. But consider getting trauma insuranceincome protection insurance or total and permanent disability (TPD) insurance in case you get sick or injured.

How much life cover you might need?

To decide how much life cover to get, consider how much money you or your family would:

  • need — to pay the mortgage, credit cards and any other debts, childcare, school fees and ongoing living expenses.
  • receive — from super, savings, the sale of any investments, your paid leave balance, and support from your extended family.

The difference between these is the amount of cover you should get.

Use our Life insurance calculator

Work out if you need life insurance and how much cover you might need.

If you need help deciding if you need life cover, reach out to the Sherlock Wealth team for assistance here.

How to buy life cover

Check if you already hold life insurance through super. Most super funds offer default life cover that’s cheaper than buying it directly. You can increase your level of cover through your super fund if you need to.

You can also buy life cover from:

  • a financial adviser
  • an insurance broker.
  • an insurance company

Life cover can be bought on its own or packaged with trauma, TPD or income protection insurance. If it’s packaged, your life cover may be reduced by any amount paid on other claims in the package. Check the PDS or ask your insurer.

Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.

Life cover premiums

You can generally choose to pay for life cover with either:

  • stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age.
  • level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time.

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

Compare life cover.

Once you know how much life cover you need, shop around, and compare:

  • benefits and policy features
  • exclusions
  • waiting periods before you can claim.
  • limits on cover
  • the cost of the premiums — now and in the future

A cheaper policy may have more exclusions, or it may become more expensive in the future. You can find information about the policy on the insurer’s website or in the Product Disclosure Statement (PDS).

Use our Life insurance claims comparison tool

Compare how long it takes different insurers to pay a life cover claim and the percentage of claims they pay out.

What you need to tell your insurer

You need to tell your insurer anything that could affect their decision to insure you. You need to give them this information when you apply, renew or change your level of cover.

Insurers usually ask for information about your:

  • age
  • job
  • medical history
  • family history, such as a history of disease
  • lifestyle (for example, if you’re a smoker)
  • high-risk sports or hobbies (such as skydiving)

If an insurer doesn’t ask for your medical history, it may mean that the policy has more exclusions.

The information you provide will help the insurer to decide:

  • if they should insure you
  • how much your premiums will be.
  • terms and conditions for your policy

It is important that you answer the questions honestly. Providing misleading answers could lead an insurer to deny a claim you make.

Making a life cover claim

If someone close to you dies and you need to make a claim, or if you need to make a terminal illness claim, see how to make a life insurance claim.

If you would like help reviewing or selecting appropriate life insurance cover, please reach out to the Sherlock Wealth team here to help you look at what’s right for you.

 

Source: MoneySmart
(ASIC)

Choosing an income protection policy

Choosing an income protection policy

MoneySmart
(ASIC)

Some of the things you’ll need to consider when choosing an income protection policy are:

Policy type

Income protection policies are provided as either an:

  • Indemnity value policy — the amount you’re insured for is a percentage of your salary when you make a claim. If your salary has decreased since you bought the policy, you’ll get a smaller monthly insurance payment. Indemnity value policies are generally cheaper and can be useful for people with a stable income.
  • Agreed value policy — the amount you’re insured for is a percentage of an agreed amount when you sign up for the policy. These are generally more expensive but can be useful if you have income that changes from year to year.

Waiting period

This is the amount of time you must wait before your payments start. Most income protection policies offer a waiting period between 14 days and two years.

In general, the longer the waiting period, the cheaper the policy. When you’re choosing the waiting period, think about how much you have in sick and annual leave, savings and emergency funds.

Benefit period

The benefit period is how long the monthly payments will last. Most income protection policies offer two or five years, or up to a specific age (such as 65). The longer the benefit period, the more expensive the policy. But it also means greater protection if you’re unable to work for a longer time.

Stepped or level premiums

You can generally choose to pay for income protection insurance with either:

  • Stepped premiums — recalculated at each policy renewal, usually increasing each year based on the higher chance of a claim as you age
  • Level premiums — charge a higher premium at the start of the policy, but changes to cost aren’t based on your age so increases happen more slowly over time

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

If you would like to discuss what income protection options are available for you, please reach out to the Sherlock Wealth team to discuss your unique situation here

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