Most Australians understand that they should have a life insurance policy in place, but too many put the decision to purchase life cover off for many reasons. One of the top reasons many avoid addressing their life insurance needs is lack of understanding; insurance can seem complicated, and there’s a fear of choosing the wrong life insurance policy, or perhaps of needlessly overspending on more coverage than you need.
The best place to start is from scratch. Educate yourself on the many facets of life insurance cover, beginning with the basics. You should never feel pressured to make a decision on any life insurance policy for any reason.
Below are some basic definitions you need to know when you’re ready to compare life insurance policies. Familiarise yourself as much as you can with facts regarding the definition of term life insurance, how it works, who needs it, and how much will you need. Visit MultiCover.com.au for a wide selection of life insurance policies and providers to compare.
Always discuss your insurance questions with a professional advisor if you have any doubts about the process. Your advisor will explain the differences in policies, and can help steer you toward the life insurance cover best suited to your individual needs.
What is Term Life Insurance?
Term life insurance is a personal insurance plan that pays a predetermined lump sum in cash upon your death. This lump sum is paid directly to the person you name as your beneficiary, usually a spouse, child, other family member or companion.
When you purchase a term life insurance policy, you select the payout sum that you believe would be needed to pay your financial obligations, perhaps the income you would have earned over time had you not passed away, and allow your family to live comfortably after you are gone.
Much like your auto or home insurance policies, you pay a monthly premium on your term life insurance policy, and you are covered as long as your premium is paid. If you discontinue paying your premium, your coverage will lapse. Term life insurance can be a smart and cost-effective way of securing financial peace of mind for your family in the event of your death, without the need to make an investment or commit your savings in order to be provided coverage.
Why Do I Need Life Insurance?
Try to imagine what would happen if you were to suddenly pass away. Your family would have to bear the emotional impact that the unexpected death of a loved one causes. But would they be additionally burdened by financial hardships without your income? Consider your annual salary, and then multiply that figure by the number of years left before you plan to retire.
The total is most likely a considerable sum of money. By choosing to avoid buying term life insurance, you are in effect choosing to risk the remainder of your lifetime earnings value, and that represents the well being of your family – from paying the mortgage on your house to purchasing groceries, paying education and health care costs, and much more.
You wouldn’t risk quitting your job without another position already lined up – if you did, how would your mortgage and car payments be made, and how would your family get food on the table? If you were to pass away unexpectedly, your term life insurance policy can offer the back-up protection your family will need to continue without you.
Unless you have accumulated a considerable amount of wealth that will take care of your family when you no longer can, term life insurance is possibly the only reliable way of planning for your family’s well being ahead of time.
Does my Spouse also Need Life Insurance?
Many Australians think that life insurance is meant for the breadwinner, most often the male head of household. But consider the ramifications if your non-working spouse were to pass away unexpectedly. Let’s consider that your non-employed spouse is female, and that she takes care of the home and children full time.
If she were to die suddenly, who would step in and take full time care of your children? Would they need to go to a day care facility or after-school care now that there is no full time parent in the home between 8 a.m. and 5 p.m.? Or, would you hire a live-in babysitter? Could you afford to?
If your non-working spouse took care of the chores, finances, and day-to-day operations of your family’s household, how will you manage it all alone? Will you need to take on a second job to cover new costs you hadn’t counted on, such as child care, housekeeping, and more?
Any time a loved one dies, there is tremendous grief and stress in the lives of those left behind, particularly when there are children involved. Adding a financial burden to an already difficult period can seem almost unbearable to those who must sort it all out and decide how best to move forward, for their own sake and the sake of the rest of the family. Even though your spouse may not be working outside the home, be careful not to underestimate the contribution she or he makes to your family and household by keeping it functioning smoothly.
The loss of a non-working spouse can create a significant financial burden. By taking an honest look at their contributions and considering what you would need to do for your family, term life insurance protection could be a good option for both of you.
Who Will Receive the Claim Funds and how are They Allowed to Use it?
The person that you assigned as your beneficiary when you purchased your term life insurance policy will receive the lump sum payment within a predefined amount of time following your death. There are no limits placed on how this money can be spent; the beneficiary, most often a spouse, is free to use the money as they deem fit. The funds can be used to pay off your mortgage, car loans, children’s school tuition – whatever is most suitable for your family.
Having a term life insurance policy can be an investment in peace of mind. Discuss your options with a professional advisor, and visit MultiCover.com.au to compare life insurance policies and pricing.