How to find low cost term life insurance policies with the necessary benefits and features.
Like most things in life, the most affordable insurance, whether it be life or general insurance need not necessarily be the best, although, for life insurance in particular, the argument can be put that cheap term insurance can give you a much larger cover at a much lower premium than can whole life based policies. That is if you are willing to forego your premiums should you survive the term you took the insurance out for. With what is often considered to be unaffordable insurance life cover, that of whole life, you do receive the cost of your premiums back should you surrender your policy and your beneficiaries will receive the full amount you have insured your life for if you should die in the meantime.
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What can Life Insurance Plan Benefits be Used for?
Aside from providing the security of your loved ones, there are other benefits life insurance can give you.
- Final Expenses. These include funeral expenses, debts, and estate taxes. Just imagine the financial stress the surviving family members will have to go though without life insurance. By having one, the insured does not only provide security, but a legacy as well.
- Income Needs. When a breadwinner dies, everything freezes. It is a big blow to the family when the main income provider passes away. By having life insurance, the family can easily survive and adjust while dealing with the loss.
- Education. If the insured happens to have kids who are at university, death can hamper that dream. Life insurance assures you and your family members that whatever happens, there is still some kind of income to finance your kids’ college education.
- Life Benefits. Not only is life insurance beneficial during death, but in life as well. The insured can use it as an investment capital, for retirement, and other things.
Different Types of Insurance
There are different types of insurance, so are policies. It can be purchased as a stand-alone or through your superannuation fund. To get a better understanding what the different types of insurance is, it is divided into three categories.
- Life Insurance. As discussed, life insurance is used to pay off debts and other expenses at the event of death, illness, or disability.
- Income Protection. Also known as Temporary Salary Continuance, this provides income replacement if you cannot perform job-related tasks due to illness and injury. It also covers your living expenses and business expenses, if you are business owner. Income protection pays benefits which total to 50% to 75% of your total income when rendered permanently disabled or severely ill. A monthly steady stream of income is paid to the insured until he re-enters the workplace again. In some events, income protection can continue until the retirement age of 65.
- Recovery Money. This is a tax-free lump sum paid in the event of a long term or short term financial need due to trauma or disability.
If it is proven that you are unable to perform work-related duties due to severe illness or accident, you can make a claim under this coverage.
Buying Life Insurance
Life insurance is a commodity that people should have to protect them from any unlikely events. It is, however, ironic how people would readily have their cars insured but not their life.
Life insurance can give you the security that you need. So when contemplating about buying insurance, there are several ways how you can purchase it. The method you choose would depend on your needs and the time you have.
- Through a financial adviser. If you are not sure what type of insurance you need, employing the help and input of an expert is priceless. A financial adviser can give you insight on how to purchase life insurance that fits your lifestyle and your budget.
- Online. If you are confident in purchasing your insurance alone, you can purchase in the comforts of your own home with just a click away. Get a quote online in just minutes.
- Through your superannuation. For most, death and disability cover is automatically added in their superannuation. You could check your super to see what kind of insurance is included and what level the coverage is. Life insurance purchased through your superannuation entitles you to a lot of tax concessions.
How much is Life Insurance
There are a number of factors that affect how much your insurance might cost. Your premium would depend on basically two factors: your age and your health condition. In addition, the kind of lifestyle, occupation, and type of policy you have would also play a huge part on the total cost of your insurance.
- Age – This is one factor you can’t change, so take out life insurance as young as you can.
- Health Condition - You may have to undergo a series of medical tests to determine your health. Your family’s medical history is also included in the evaluation, since it could affect your well-being in the future.
- Lifestyle – Being a smoker exposes you to a lot of health risks. A smoker might have to pay a higher premium than a non-smoker because of this risk exposure.
- Occupation – There are occupational hazards that might put a person’s life in danger. People who have high risk jobs, such as a fire fighter, would definitely have to pay a higher premium than an office clerk.
- Policy – The type of policy and the level of coverage you want is another factor that would affect the price of your premium.
Beware of No Health Check Low Premium Policies
With the advent of affordable insurance for your life, your car, your home and more, being available online, there are now new things you need to be wary of when choosing the cheapest life insurance option. Often when you apply for life insurance online you don’t need to take a medical test and you can secure very low premiums. Plus, many online insurers claim that their life insurance can be delivered faster and cheaper, and this should serve as a warning that you should look very carefully at the small print.
All life insurance whether it be whole life, or term, must eventually be based on the risk the insurance company is willing, or can afford, to carry. For them to be successful, and responsible, they must know what that risk is. The only other way they can avoid having to pay out large sums of money on bad risk policy holders who have obtained their insurance too cheap, is to make it harder for the beneficiaries to claim. The small print in the policy may well void certain incidents that other policies would cover.
Avoid Overnight Insurers Who Pop Up From Nowhere
For an insurance company to remain successful it must have a large number of policy holders, hopefully of a young age and low risk, to outweigh the number of payouts they expect to make. This can not come about overnight. The company you choose to trust to pay out the full amount you have insured your life for must be big enough to be able to honour such an undertaking. The length of time an insurance company has been in business is a good sign that it is able to sustain downturns in the world economy as well as any natural disasters. New insurance companies offering cheap cover will not have proved their credentials and may not be able to pay out the amount you expect them to when the time arrives for them to 'front up'.
Always Remain Wary
When looking around for affordable insurance, life as well as any other, it will pay to ask questions about the company as well as do your own research. Investigating an insurance company's standing is much easier these days as it can be carried out in your own home, online. The internet is a wonderful way of checking any answers you may be given to a question asked of your potential insurer. You are also able to gather information from others, in the various online forums, of their personal experiences with any particular insurer. If you do your homework you will be much more at ease with your decision than you would have been otherwise.
Term Life Insurance is Still the Most Affordable
Term life insurance is by far the insurance with the lowest premium, especially if you are under 45 years of age. Large amount of affordable insurance, life in particular, can be obtained at a relatively low premium cost with term life insurance. This is because you are only insured while the term you have requested is still in force. Once this term expires your insurance cover lapses and if you require any further insurance you will have to take out a new policy, for which you will have to pay a higher premium because you will be that much older. The premium cost of term life insurance increases as you get older because the risk of you dying becomes greater. In fact the cost will become quite prohibitive, if you can get it at all, once you have reached your sixties. The answer to this escalation in premium costs is to take out a large amount of term insurance when you are in your twenties or thirties and plan to start a family, as well as buy a house. Have the term of this policy expire when your greatest responsibilities are off your hands, for example when your youngest child reaches 18 years and the mortgage is paid. You can then take out a smaller term cover to last you until you retire. All you need after that is a funeral plan and means to pay off any smaller debts you may still have outstanding.
How to Compare Affordable Term Life Insurance
Before you approach a life insurance company for an affordable term life insurance quote you'll need to do a little homework so that you know exactly what you need, in order to secure adequate protection for both yourself and your dependants. Affordable term life insurance is available to cover practically any situation such as the cost of your house mortgage, business debts etc. for any number of years. Some people tailor this cover to protect them while their obligations are at their greatest and then lower the cover to represent the less exposure experienced as the house becomes paid for and as the children grow and eventually leave home to start a life of their own.
Besides having enough term life insurance, affordable total and permanent disability as well as income protection insurance are also important options to have included. Affordable term life insurance is widely available but it's not always wise to accept the cheapest quote simply because it's the cheapest. Life insurance, including income protection and total and permanent disability cover, are very important contracts you enter into and you must be absolutely certain the company you finish up doing business with will be there if the time arrives for a claim to be lodged.
It's therefore vitally important you do business with a reputable company that's been around for a long time and has built a reputation for itself. Thanks to the internet, it's much easier these days to get a fairly good appraisal of how a company treats its policy holders by visiting the various forums and reading what people say about their personal experiences with the different life insurance companies.
Most of the larger life insurance companies today are the off shoots of more established international companies that have had a name change through takeovers and business rearrangements. Many are now part of the general financial industry. All this can be discovered with a bit of time put into research that will pay dividends down the track especially if you confine your affordable term life insurance quotes to the true tried and tested companies.
Why is Term Life Insurance Affordable?
The number of people looking for an affordable term life insurance quote each year has increased substantially in recent years because of superannuation being made compulsory in the workplace by the Australian government. Superannuation, although primarily designed to provide sufficient funds for employees to retire on, also carries with it a death benefit should the superannuation fund member die prematurely. This added protection is provided for with affordable term life insurance because it's the only insurance that pays large amounts of benefit at a low cost.
Before superannuation became mandatory most life insurance sold in Australia was whole of life. This type of life insurance had an inbuilt investment portion which meant the insured person could build up a cash value in the policy which could be borrowed from, or accessed through the surrender of the policy, if it wasn't kept in force to be paid out on the policy holder’s death. However, it was an expensive cover and many couldn't afford the large amount necessary to fully cover their mortgages plus have sufficient money left over to provide for the family left behind. This meant a big proportion of the community was under-insured.
Superannuation is basically built around the fund manager investing the money in large group amounts which builds up to a substantial amount after a few years. In the meantime cheap term life insurance provides a death benefit also of considerable proportion. The only drawback in term life insurance is that, as its name implies, it's only effective for a certain period, or term. Once that term expires and no claim has been made, the cover expires and the money paid in premium costs is forfeited to the insurer, this, however, is what makes term life insurance affordable. Much like what happens with general insurance that's taken out as home and content insurance, or car insurance.
Tips to Avoid Being Under-insured with Low-Cost Life Insurance
A report undertaken by Rice Walker for the Investment and Financial Services Association found that six in ten Australian families with dependants had insufficient life insurance to provide for family members for any longer than one year if the prime family breadwinner was to suddenly die. This is despite affordable term life insurance being readily available.
Term life insurance has made life insurance affordable in Australia but many people still cling to the thought of this not being true. No doubt a belief carried over from when the costlier whole of life insurance was the main stay of Australian life insurance protection.
Although superannuation, with affordable term life insurance, is now widely used within the community, the reason for the statistic showing insufficient protection is that the amount of cheap term life insurance held is not anywhere near the recommended 10 times the policy holders’ current annual salary. To ensure you aren't one of the people who are regarded as being under-insured you should take note of the following tips:
- Regularly review your entire life insurance portfolio.
- Make certain you have enough cover to pay off the balance of any mortgage remaining unpaid, or if renting have sufficient cover to allow the family to purchase a home of their own.
- Have enough protection to pay off all your outstanding debts so that no hardship is placed on those who you leave behind.
- Make certain the family has sufficient funds to invest to earn them in a living wage that'll support them in the manner they've become accustomed to living; this is usually estimated to be 10 times your annual salary.
Considerations When Applying for Life Insurance
The process of application can only take a few hours of the day as long as you have complied with all the requirements. After that, you can start paying your premiums and secure your family through your insurance cover. But before you make your application, there are things that you need to consider and understand. First, understand the standard provisions of the life insurance especially the coverage and terms and conditions of your policy. You need to provide all necessary information needed in your application and disclose pre-existing medical conditions if there are any.
Second, decide on who you will assign as the insurance beneficiary. The insured individual can choose any beneficiary according to his or her wishes. You can have your insurance claim paid to your estate and it will be distributed as instructed in your Will of Estate Plan. You can also have your insurance claim be paid directly to your beneficiaries as stated in the policy document. You can also name other person to which you want your insurance proceeds to be paid. Other beneficiaries of your life insurance can be your superannuation fund, a company or trust.
A third consideration involves deciding on the distribution options. It is the manner in which your life insurance benefits can be distributed or the mode of payment for your insurance benefit. The most common is the lump sum distribution. It is a one-time cash payment to your designated beneficiary. You can also choose the interest option where you only receive the interest of your insurance claim which serves as your income while the death benefits are left with the insurance company. Beneficiaries can also choose for an installment option whether for a fixed installment period or fixed installment amount. It is important to have the proper information regarding your choice before taking out any form of insurance since this would entail a considerable monetary investment. Make sure to make your investment worthwhile in order to protect your family’s future at the maximum.
If the return from your life insurance can't do any of the above it's an appropriate time to look around for an affordable term life insurance quote from a reliable insurer to remedy the situation before it's too late.