Is life insurance really worth the investment?
Life insurance provides a lump sum benefit to those that are financially dependent on you in the event of your death or terminal illness. This benefit can be used cover your loved ones ongoing living expenses and any outstanding debt that you may still have. This payment means that your loved ones can maintain their current way of life and not endure financial stress.
This article will outline the main benefits of life insurance and other types of protective cover.
9 benefits of life Insurance
- Life insurance will pay a lump-sum benefit (in some cases to an unrestricted amount)
- Benefit payments are generally tax-free
- Some companies offer multi-policy discounts if you take out cover with your spouse
- Cover can generally be bundled with other types of life insurance
- Most brands will let you increase or decrease the benefit of the policy at later stages
- Most policies will provide an advance benefit payment to cover immediate costs following death without having to serve a waiting period
- Some policies can be funded via your superannuation
- Some policies offer complimentary child cover in the event your child passes away
- Policies can be purchased direct from the insurance brand or with the help of an adviser
Types of Life Insurance
Among the hundreds of life insurance plans and packages available to Australians, there are three styles of cover which all life insurance policies can be categorised as. Each of the three main types can be purchased as a standalone policy or put together in an insurance package.
These three main types of insurance are income protection insurance, critical illness insurance, and cover life insurance. They all have the same basic purpose – give security to you and your family by paying a benefit that would help you adjust to the major changes in life, such as death, injury, illness, or disability.
Income Protection Insurance
Income protection insurance is a type of insurance that pays out a steady stream of income on a monthly basis. The payment could be up to 75% of your gross monthly income although it may be different depending on the insurance provider. It covers you when you become disabled and are unable to work because of an illness or injury.
Nowadays, leading insurance providers have increased their maximum benefits giving their clients more cover. They have even included an optional benefit which allows you to take advantage of their rehabilitation program, which aids the policy holder to get back on track.
This rehabilitation program pays a maximum amount of up to 50% of your gross monthly income if you are eligible. The rehabilitation program includes all the resources and training you can get to help you get back to the work force smoothly. This means covering the costs for approved rehabilitation programs, vocational training, special equipment, and workplace modifications to ensure smooth transition.
Critical Illness Insurance
Critical Illness Insurance is also known as Trauma Insurance. It was first conceptualised in South Africa by a doctor named Dr. Marius Barnard. Involved in the world's first heart transplant, Dr. Barnard was confronted by the fact that although he can save a person's life, he cannot save them financially.
Trauma insurance does not wait for you to die before it pays you a benefit; therefore it falls under the category of 'living' insurance. And since it falls under that category, it provides you with benefits while you still have a quality of life. It provides a lump sum payment when you have or is diagnosed with a life-threatening illness, like cancer, stroke, and heart disease.
Life insurance eases the burden of what the extra expenses could cause to your finances by paying you a lump sum in the event of the insured's death. Furthermore, it helps you and your family to adapt emotionally and mentally to changes brought about by death and disability through the financial benefit you can receive during these events. Instead of being emotionally and financially hurt by sudden death or accidents, life insurance assures you that whatever may happen to you, your loved ones will still enjoy the same lifestyle.