In Australia, roughly 95% of the population is either underinsured or not insured at all when it comes to income protection. In fact, about 38 percent of Australian families do not have any life insurance benefits to protect them financially in case the main breadwinner dies.
If you have a family, then you need to consider what might happen in the event of your death. How are they going to handle the mortgage payments, car payments, living expenses and your funeral costs?
The only way most people can provide their loved ones with financial security after their demise is by purchasing life insurance. If you die from an illness, accident or natural causes, your family members and dependents will be entitled to receive financial benefits from your life insurance plan, ensuring that they don’t financially struggle after you are gone.
There are different kinds of life insurance policies available. Some policies provide your family with one lump-sum payment, while other policies will provide an income stream or money to invest.
Before purchasing a plan, it’s important to understand the different types of life insurance policies available. Then, based on your personal circumstances and your family’s specific needs, you can choose the best policy for your situation.
Understanding Types of Life Insurance
A standard life insurance policy will pay your beneficiaries one lump sum if either you are diagnosed with a terminal disease or you die altogether.
However, you can also choose trauma insurance, which pays one lump sum if you fall victim to a specific health condition, such as a stroke or heart attack.
Income protection insurance is another option which can replace up to three-fourths of your current work income if you become injured or ill.
Total disability insurance is another similar option, but it pays a lump sum in the event that you are permanently disabled from your injury and can no longer work for the rest of your life.
Who and What Do You Need to Cover?
The main beneficiaries of a life insurance policy are typically your spouse and children. Your policy should cover the bigger expenses like the mortgage payments and the operation of your business if you have one.
With a business expenses insurance policy, you could provide benefits to another key person in the company so that they can keep the business operating in the event of your death.
How Much Coverage Do You Need?
Your life insurance coverage should amount to enough to pay all your debts and secure the future of your children. This could include coverage which pays for their child-care services, grade school accessories, child support and even college education.
Basically, you will want your family to be just as financially comfortable after you pass away as they were before you die. Think about this when choosing the coverage amount.
Understand Premiums and Costs
Premiums are the monthly payments you make to the insurance company so that your insurance policy stays active.
The amount of your monthly premium will depend on a variety of personal factors concerning your health and personal physical traits. Some of these factors include your gender, age, current health status and whether you smoke or have ever been a smoker.
Any pre-existing health conditions will be examined thoroughly by the insurer. If you already are dying of a terminal illness, then you probably won’t get approved for life insurance. That is why it is better to get your policy sooner rather than later.
All these different choices for your life insurance can be confusing. It is best to contact a certified financial planner so that they can explain the best way to protect your family and assets.
A financial planner is more trustworthy than a life insurance sales agent because the planner is not trying to sell you something.
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