Types of Life Insurance Policies: Which is Right for You?

There are six basic types of life insurance policies in Australia. The type you get is solely up to you. It should be based on your needs, your financial position, and your health. Every policy has benefits to you, but each one will also raise the premium you will need to pay. It is not a choice that you should make lightly. You need to ensure that you have the correct coverage amounts, but not so much that you must put a mortgage on your house just to pay the premium amounts. The best way to make an informed decision is to educate yourself.

6 Types of Life Insurance Policies

This article will go over the six types of life insurance policies and what they can do for you.

Types of Life Insurance Policies - Which is Right for You - Life Insurance

Life Insurance

This is one types of life insurance policies with which you are probably most familiar. It will give your loved ones a lump sum payment if you pass away while the policy is in effect. It is designed to help your friends and family pay for your final expenses and pay off any debts that you may have.

When you choose that type of policy, you can decide on the payment that you want your family to receive. The higher the payout, the more your premiums will be. You will be required to fill out an application before you are offered an actual policy. It will want detailed information about how you live your life, such as your occupation and hobbies, as well as in-depth information about your health and your health history. If the company has any questions, they may ask you to get a medical examination to verify your health status.

Income Protection

As you would presume from the name, this type of coverage will pay out a set amount every month if you file a claim. It is designed to replace up to 75% of the wages that you earned before you had to file for it. It covers anything that causes you to be off work because you cannot do your job.

Accidents at home, illnesses such as cancer, a surgery that has you down for a long time, and others that fall into the umbrella of coverage can be a cause to file a claim on your life insurance in Australia.

If you are injured or become ill, to the point of taking time off work, you will get a monthly check to help cover your bills.

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Total and Permanent Disability Insurance

TPD insurance is a lump sum that they will pay out to you in the case of a disability that restricts you from ever working in the profession you are currently in. It will not pay out if you are found to be down temporarily. You must be unable ever to return.

Nobody ever wants to consider that this will happen, but it does. The Australian Institute of Health and Welfare states that 1 in every six people has some type of disability. One out of each three of those people has a severe disability.

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Trauma Insurance

This coverage will also give you a lump sum payment. It is designed to help you cover bills and medical costs that are not covered by your insurance. This coverage not only applies to older people. The younger generation can have traumatic experiences as well. Ones that will put them down and out because they had not planned ahead.

You can file a claim for this policy if you have an ailment listed in the paperwork. Some of the most common are stroke, heart attack, bypass surgery, and many others. Your insurance carrier will document what is covered, so there are no surprises if you ever need to file a claim.

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Types of Life Insurance Policies - Which is Right for You Business Expenses Insurance

Business Expenses Insurance

This coverage will kick in when you are a business owner and suddenly become unable to work due to an accident or illness. It will cover the number of your outgoing bills that are needed to keep the business going. This can be an essential policy to add to your basic life insurance if you own a business. You have put a quantity of hard work into your company, and it would be a shame to lose it all simply because you had to take some unexpected time off.

Income taxes, and the costs of inventory, are usually not covered with these types of life insurance policies. It only covers your overhead bills, such as utilities, payroll, rent, and others that are considered to be necessary operating expenses. It will also not cover any attorneys you have on staff or payroll expenses for your temporary replacement.

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Types of Life Insurance Policies - Which is Right for You - Accidental Injury or Death

Accidental Injury or Death

This sort of policy will pay out a lump sum if a claim is filed. It will cover you or your family if you are injured or killed. It is designed to cover your living expenses until you are healed, damaged, or help pay off debt if you are killed.

Many people get this confused with the policy explained above. It is a different policy than income protection and does not pay out for illnesses that may keep you from working. This is a lumpsum payment to help with medical bills or costs associated with final preparations. It does not give you a monthly income like income protection does.

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Final Thoughts

As you can see, the six types of life insurance policies cover various aspects of your life. Now that you understand the concepts behind each, you can make an informed decision. Compare many different companies by using an online comparison site, and choose the right types of life insurance policies for you.

Money Smart states that you should do before deciding on a policy to read the product disclosure statement (PDS). This is a detailed explanation of all their terms and conditions, written out in plain English so you can understand it. If there are parts that confuse you, step up and ask questions. Never leave them unanswered when it comes to a life insurance policy in Australia.

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