Variable life insurance comparison Australia

Is variable whole life insurance still available in Australia?

If you’re in the market for life insurance cover, one of the options you might have seen mentioned online is variable life insurance. Also referred to as variable universal life insurance, this type of cover is a form of permanent life insurance that offers flexibility in regards of its terms and also its investment possibilities.

However, this form of life insurance is no longer offered in Australia. Instead, the main type of life insurance you can find in Australia is referred to as term life insurance.

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What is Variable Life Insurance?

Variable life insurance is a form of permanent cover, which effectively means that it remains in force for the policyholder’s entire life. However, it has a few unique features that set it apart from other types of products on the market.

For starters, policyholders are allowed to decide how much money they will invest in their policy above a set minimum. This means that the benefit amount is adjustable and that how much customers have to pay for premiums is flexible.

Variable life insurance also includes an investment component and policyholders get to take control of how their premiums are invested. Policyholders get to invest part of their premiums how they wish, letting them take advantage of the possible high returns offered on the financial market.

With a variable life insurance policy, you have a range of investment options to choose from that belong to the insurance company’s portfolio. These may include shares, bonds and many different types of funds.

As mentioned previously, it is variable life insurance is no longer offered in Australia as it is considered to be too expensive.

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How Does a Variable Life Insurance Policy Work?

Variable life insurance is designed to let you take control of your investments and manage their performance. Rather than having a life insurance company manage your investments on your behalf, you are allowed to take charge of the investment component of your policy and invest your money where you wish. This allows you to make your money work and hopefully grow for you.

With a regular life insurance policy, the insurance company invests your premiums however it wishes and pays out a benefit upon the policyholder’s death. With a variable life insurance policy, the policyholder can choose where to invest their premiums depending on their investment goals. You may choose to invest in bonds, shares or investment funds — whichever option you think will yield the highest returns for your hard-earned dollars.

There are typically several sub-accounts that you can choose to invest in. Then, the overall value of your policy will depend on the underlying performance of those investments. When you die, your beneficiaries will receive the benefit from your variable life insurance policy.

Other features of this type of insurance include the ability to adjust your death benefit within set limits, plus the option of altering the timing and amount of your premiums to suit your budget.

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Pros and Cons of Variable Life Insurance

  • You take control. You are able to take control of your money and choose where and how you want your premiums to be invested.
  • It’s risky. Being an investor always involves an element of risk. If you don’t make sound investments the value of your policy could drop dramatically. If you’re not confident in your investing abilities, this is probably not the right policy for you.
  • Plenty of options. There are multiple investment options including shares, bonds, investment funds, fixed-interest options and more.
  • Expensive. Variable life insurance is generally considered to be the most expensive of all the life insurance policy options. You may be able to invest much cheaper elsewhere. You could end up with an insufficient benefit amount if you make poor investment decisions.
  • Flexibility. Variable life insurance offers flexibility when it comes to the timing and amount of your premiums. You can also adjust the death benefit amount to suit your needs, but the policy will have a set minimum death benefit.
  • Achieve huge gains. Invest wisely and you can see the value of your policy skyrocket. The gains you make in a variable life insurance policy are tax-free.
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Benefits of Term Life Insurance

As whole life insurance is no longer offered in Australia, term life insurance is the way to go for Australians looking for life cover. These policies allow you to select the term you would like to take out cover for (typically five, 10, 15, 20, 25 or 30 years) and they pay a lump sum benefit to your beneficiaries if you die or are diagnosed with a terminal illness.

It’s incredibly easy to find and arrange term life insurance cover. If you need help finding cover, you can go the traditional route and purchase cover through an insurance adviser. adviser have specialised knowledge of the insurance industry and can match you with a policy that meets your needs. However, it’s also possible to buy direct life insurance online or over the phone from an insurer. Direct policies are designed to be simple to understand and quick and easy to apply for.

Term life insurance is also much more affordable than variable life insurance and other whole life insurance options. This means that you can typically find a policy with premiums that are manageable and that suit your budget.

Another benefit of term life insurance is the flexibility it offers. The ability to choose the term of your policy can help if you’re on a budget, plus you’re able to make changes to your policy in the future to reflect your changing needs. Many policies also allow you to include cover for trauma, TPD and loss of income, meaning you are able to take care of all your life insurance requirements.

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Will Whole Life Insurance Return to Australia?

Whole of life insurance policies have been out of favour in Australia for at least a generation, with term life insurance considered to be a more affordable and suitable option. However, that doesn’t necessarily mean that whole life policies won’t one day return to our shores.

Some industry experts believe there is a place for term and whole of life products in the Australian market as they meet the needs of different people. While permanent life insurance is more expensive, it does contain an investment component and is guaranteed to one day pay a benefit. On the other hand, while term life insurance is cheaper, the question is ’if’ it will ever pay out a benefit and people will see a return for the money they have invested into cover.

Whether or not the Australian industry re-evaluates its approach to whole life insurance products, only time will tell. In the meantime, there is an extensive range of term life insurance offerings available to ensure that all Australians have the option of finding the cover they need.

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