Types of life insurance
There are different types of cover that fall under the broad heading of life insurance. Depending on your circumstances you may need one or more of these:
- Life cover - also known as term life insurance or death cover, pays a set amount of money when the insured person dies.
- Total and permanent disability (TPD) cover - covers the costs of rehabilitation, debt repayments and the future cost of living if you are totally and permanently disabled.
- Trauma cover - provides cover if you are diagnosed with a specified illness or injury. These policies include the major illnesses or injuries that will make a significant impact on a person's life.
- Income protection - replaces the income lost through your inability to work due to injury or sickness.
For all types of life insurance you need to disclose any pre-existing medical conditions if you are asked. Failing to 'tell it like it is' can leave you with a worthless policy.
Getting a life insurance policy
You can buy life insurance in three main ways:
- Super fund - Many working Australians have some life and disability insurance with their superannuation.
- Insurance companies - Many financial institutions and specialist insurance companies offer life insurance.
- Insurance brokers and advisers- You can also purchase a policy from an insurance broker or financial adviser.
It is a good idea to shop around for life insurance and compare policies based on the level of cover they provide, exclusions and value. If you switch to a different insurer it is important to keep your existing cover until you have a new policy in place so you're always covered.
To access the full article and for more information visit: www.moneysmart.gov.au/insurance/life-insurance