Your Insurance cheat sheet
Life insurance can seem confusing and we get that, but here's a few tips to simplify the jargon. Once you wrap your head around the basics, life insurance is fairly simple to understand.
Here's some tips on life insurance, what it is, how it works, and why it’s worth thinking about.
What is life insurance?
Life insurance is financial protection for the beneficiaries you nominate in the unfortunate event of your death, or if you are diagnosed with a terminal illness.
Every insurer has their own definition of a ‘terminal illness’, but it usually means you get diagnosed by a doctor with having 12 months or less to live.
You pay a regular fee known as a premium, and in return your beneficiaries will receive a payment that would cover costs such as your funeral and other ongoing bills or expenses when you pass away. This allows your loved ones to maintain their lifestyle, keep the roof above their heads, and continue living the way you would like them to – rather than worrying about costs and day-to-day expenses.
A few life insurance terms you’ll need to understand
If you’re new to life insurance, you’ll probably come across some words that you might not see every day, and these can all sound a bit confusing.
Here are some terms you are likely to hear about when taking out life insurance.
Benefit amount:
The amount of money the insurer pays for the ‘event’ covered under the policy (For life insurance an event could either be a death, or the diagnosis of a terminal illness).
Beneficiary:
The person or people that you nominate to receive the benefit amount payout.
Insured event:
This refers to the event the policyholder is covered for in their insurance policy, for example total and permanent disability, terminal illness, or death.
Policy:
This is the legal contract between the policy owner and the insurance provider.
Policy schedule:
This is the document that confirms the details of your policy.
Premium:
The amount you pay for your policy, this can be paid monthly, quarterly or annually.
Underwriting:
This is the insurer’s process of identifying what level of risk is involved in providing you with insurance cover. The health and lifestyle questions asked in your application help determine premiums.
Different types of life insurance
Some life insurance policies come with optional cover for serious illnesses or total and permanent disabilities (TPD). These are optional extras that you can add on to your policy – which may be something to consider if you have a young family or loved ones to care for, as your adviser we will step you through identifying if you have additional needs.
Taking out serious illness or TPD cover means if you have a heart attack or a stroke, or are diagnosed with cancer, your life insurance policy could provide a payout to help with medical bills and other costs. Or, if you suffer a lifelong permanent disability, you could also receive a payout to help replace lost income or enable long-term care.
Important things you need to know and ask before you take out insurance.
How much do you want to be covered for? (The benefit amount)
How much will your premiums be? (The cost of life insurance)
What exactly are you covered for?
Who are your beneficiaries? (Your loved ones)
What information do you need to make a claim?
I'm sure like us you love living life to the fullest – and why shouldn’t you? But none of us can predict the future and sometimes things can go unexpectedly wrong. When this happens life insurance will make a huge difference in your and the future of your loved ones.
Want to know more? For a free no-commitment consultation, let’s chat.