Are you in the market for a life insurance policy?
Looking for life insurance sure can seem daunting and we know how hard it can be to find the right policy for a good price, but getting covered and protecting your loved ones won’t be so tough if you’re well prepared.
By learning a little bit about what life insurance is all about and how it applies to your situation, you will be well equipped to compare all the options out there and find the policy that is right for you.
Compared to other insurance categories, life insurance is actually pretty straightforward. But premiums and conditions can vary, and these factors among many others have to be considered before purchasing a policy.
In this article, we will share with you the key factors you need to know when comparing life insurance so that you can find the most suitable policy for you.
Life Insurance Categories
When comparing life insurance policies, you want to work out exactly what you want your life insurance to do for you, and the best place to start is by understanding the different life insurance categories available.
The two major categories are permanent life insurance and term life insurance. Permanent life insurance gives you cover for your entire life at a higher premium while term life insurance offers cover for a set period of time.
Term Life Insurance
The period of cover applicable to term life insurance is usually 10 or 20 years and it is also the most popular life insurance policy option in Australia. Several cover types come under this category including:
Level Term Insurance – A fixed lump sum is paid out if you die prior to the policy expiring. The lump sum amount is fixed and set at the time of purchasing the policy.
Increasing Term Insurance – Takes into account the rising cost of living and considers the decline of purchasing power due to inflation. Therefore, the sum insured goes up each year by a fixed amount. Premiums also rise.
Decreasing Term Insurance – Will cover a debt that reduces over time which will be paid out after your death. This results in the payout reducing over time.
Convertible Term Insurance – Policy holders have the ability to convert to a whole-of-life policy if they wish with this option, even if there have been changes to the health of the policy holder.
Renewable Term Insurance – This option allows the policyholder to renew their cover when the policy term finishes without needing a health review. Be wary of this however as a flexible renewal policy may seem inexpensive at first, but the policy can prove to be more expensive at renewal time.
Joint Life Insurance – This policy type is for couples or relatives with joint life commitments. This type of cover is on a first death basis providing one payout only when one of the two policyholders dies.
Index-Linked Term Insurance – If you want the payout to be in line with the increasing cost of living, this policy type offers a rise in both the payout and premium that is in line with inflation. Unlike increasing term insurance, index-linked term insurance has an increase in line with inflation rather than a pre-set specified rate.
Permanent Life Insurance
Permanent life insurance, also known as ‘cash value insurance’, can also be broken down further into three policy types:
Whole Life Insurance – Includes a savings feature that caters to long-term goals by offering consistent premiums as well as guaranteed cash value accumulation.
Universal Life Insurance – There is more flexibility here when it comes to premium payments, death benefits and savings elements. You can pay your premiums at any time and at any amount after paying your first premium.
Variable Life Insurance – This insurance type has an investment component that allows a portion of your premium to be allocated to a separate account made up of investment funds. This is the most expensive, permanent life insurance option available.
Level of Cover
‘Level of cover’ refers to the complete package of features, terms and inclusions found in an insurance policy. A number of factors come into play when choosing the best level of cover for you including your age, gender, health and lifestyle. For example, if you’re married with children and hold a mortgage, the level of cover you need is likely to be vastly different to a young, single person with zero debt.
So consider what you want to get out of your life insurance rather than choosing the first life insurance policy you find, because every policy is unique and is made to suit different people.
Cover Amount
Another important step to take before comparing life insurance policies is to work out the amount of money that you would like paid to your beneficiaries. To work out this figure, consider if the payout will need to cover any of the following areas to help your loved ones after you have passed away:
- Expenses
- Debts
- Income replacement
- Future goals
- Medical costs
- Home modifications
Life Insurance Assessments
Depending on your age and the level of cover you choose, insurance companies often require you to complete a number of medical examinations and assessments when applying for life insurance cover.
However, some people don’t want to go through invasive examinations to get cover, which is why non-invasive assessments are also available. Keep in mind that you will be paying higher premiums for this convenience. If you are healthy and willing to go through a longer assessment, it will be worthwhile for your hip pocket.
Pre-Existing Conditions
If you have a pre-existing condition that could impact on your cover, it’s important to get advice first from an independent insurance advisor so they can point you in the right direction towards an insurer and policy that is most beneficial for you and your condition. Some insurers may look more favourably on your condition than others and some policies may be better equipped to cover you despite your condition.
Choosing an Insurer
You need to trust that the insurer you choose will honour your claim if the need arises. Look at reviews and testimonials for the different insurers out there and use your own judgment when deciding if you can rely on this insurer come claim time.
Some factors that influence the quality of an insurer includes:
- Their level of customer service
- How long they have been in business for
- Who the parent company is
- What their claim processing history is like
- What is their reputation in the market
- Their credit score
Extra Features
Riders are optional provisions that can be applied to your policy allowing additional money to be paid to your beneficiaries depending on specific circumstances. You can add or remove riders as you wish with most insurance providers to create a fully customised policy that suits your needs. A common way you can save money is to eliminate certain riders if you feel they are not needed.
Some of the riders you may find include:
- The accidental benefit rider where beneficiaries are paid if your death was due to an accident.
- The waiver of premium rider which will pay the policy premium if an accident resulted in your total and permanent disability.
- The children’s term life insurance rider which will pay your policy premium if a child that falls under your life insurance policy dies.
- The living benefits rider involves part of a death benefit being paid in advance if terminal illness is diagnosed.
- The payor rider where premiums are waived if you die before a dependent child reaches a certain age that is specified by you.
Discount Options
If you are hoping to get a lower price for your policy, there are a number of ways you could get a discount. You could choose to pay your bill in full annually rather than monthly. Depending on the insurer you go with, you may also be able to save money by having the payment automatically withdrawn from your checking account.
Substantial discounts are also available from certain insurers for multi-policy and multi-life insurance policies. Multi-policy refers to buying more than one insurance policy at a time from one insurer. Multi-life insurance policies often involve more than one person (usually a couple) purchasing life insurance from the same insurer.
Flat Fee Policy
Rather than choosing an insurance policy with a steep commission, making you pay more than you like for cover, you could consider purchasing a ‘no-load’ or ‘low-load’ policy which are less expensive options and are sold at a flat fee. Be aware however that these ‘no-load’ and ‘low-load’ policies offer minimal customer service and they should be thoroughly examined beforehand for financial stability.
Ways to Compare and Purchase Life Insurance
Along with learning more about life insurance policies so you can compare them effectively, it is just as important to examine the different ways you can look into and purchase your policy. The most common ways people compare and purchase life insurance include:
Comparison Website
When comparing life insurance, many people turn to insurance comparison sites where life insurance quotes are displayed on the screen from a selection of brands after submitting a few details online. These websites can be very convenient, quick and easy, however only general advice is often shown on screen.
Advisors
To make sure you get the cover you need, it is worthwhile gaining personal recommendations and advice from qualified insurance advisors or insurance brokers. If you don’t take the time to evaluate your options properly, you may be under-insured or you could be getting ripped off.
Comparison Website with Advisors
You can also find comparison websites with advisors on hand also to offer advice. At Cover Australia, we offer the best of both worlds. Not only do we provide an easy to use online quoting system that will get you live quotes right away, but we also offer expert industry advice and ongoing service at no cost to you to ensure you are purchasing the best policy for your situation.
Direct from the Insurer
You could also buy your insurance policy direct from an insurer. The downside to this option, however, is that you will only be comparing the life insurance products offered by that insurer. Therefore you need to be responsible for doing the research, determining the type of policy you need and deciding whether the insurer is the right fit for you. There is a positive though, which is that you’re likely to get covered quicker.
Superannuation Fund
There is also an option to purchase life insurance through your superannuation fund with premiums deducted from your superannuation account. A variety of policies and comparisons are not an option here though, and only a base level of cover is available.
Comparing Life Insurance with Cover Australia
At Cover Australia, we want to make comparing life insurance as easy as possible by being up-front and honest about everything you need to know before choosing a policy.
Once you have taken all of these points into consideration, why not fill in an online quote form or give us a call and speak to one of our advisors. We are more than happy to help and point you in the right direction towards a policy that is the right fit for you.