Your Guide to Buying Life Insurance

We’ve compiled a number of life insurance guides to help you combat the uncertainties of dying too soon, being unable to work due to illness or injury or living longer than expected.

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Our Guides will help you determine what type of cover you require and how to get the best price. This toolkit provides valuable information on:

  • Securing your family’s future due to the loss of a loved one
  • Deciding how much life insurance you should buy
  • The different types of policies you’ll need
  • Comparing the cost of similar life insurance policies
  • Making informed decisions when buying a policy

How important is a Life Insurance Policy?

Insurance, by its very nature, is a way of managing risks. In the case of life insurance, your life is the risk. Nobody likes planning for their death or for a debilitating accident or illness. However, accidents happen every day. You need to protect yourself from the financial losses that these accidents incur.

An introduction to buying Life Insurance

When you buy life cover , you want a policy which fits your needs without costing too much. It’s a good idea to ask a life insurance specialist or company to help you, like Life Insurance Direct. If one kind of policy doesn’t seem to fit your needs, ask about others or try using our quote index to compare different policies online.

This buyer’s guide provides only basic information. You can get more facts by speaking to one of our specialists when calling 1300 135 205 or filling in the below quote form.

At Life Insurance Direct we understand that life insurance can be a difficult subject to understand. To make things easier for you, we have put together a number of life insurance guides which will help you as you go through the comparison process with us.

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Your first step to buying life insurance is to decide how much you need, how much you can afford to pay and the kind of policy you want.

  • Life cover is designed to provide you and your family with financial security in the event of your death. You need life cover when:You want to protect your household income: A life policy can be used to replace lost income, by supporting the spouse left behind in maintaining their standard of living.
  • Buying a new home. A life insurance pay-out could help your partner with the outstanding mortgage after your death.
  • You have outstanding debts. Husbands and wives should ensure their family is debt free so as to assist with their financial wellbeing.
  • Having children. If you should become unable to work, you still need to provide for them while they’re growing up.
  • Funeral costs. Assist your family with a lump sum to assist with funeral costs.

Even if you do not have any of these needs yet, you may still want to consider purchasing a small “starter” policy, if you anticipate you will have these needs in the future. Remember, the younger you are the less expensive life insurance will be.

Above reasons should be based upon your financial planning needs. Factors such as your marital status, number of dependents and cost for their support, future education needs, current and anticipated family income, and your current assets and debt obligations all play an important role in determining the amount of life cover that’ss right for you.

Choosing the Amount

In general, the more protection your life policy offers, the higher your premiums. When determining how much life cover you’ll need, figure out how much cash and income your dependents would have if you were to die today, and the amount they would actually need to maintain their current lifestyle. Your chosen policy should come as close to making up the difference as you can afford.

Think of life insurance as a source of cash needed for expenses such as illnesses or injuries and for paying taxes, mortgages and other debt.

Single with no dependants

Your priorities will be for healthcare planning, investment, savings, retirement and disability planning.

Divorced:

Healthcare planning, estate death and disability planning, investment and savings planning, maintenance and education protection for your ex-partner and dependents.

Married

Focus on healthcare planning, estate death and disability planning, investment and savings and retirement planning

Retired

Your priorities will shift to only include healthcare planning, income and estate planning.

Choosing the Appropriate type

Once you figured out how much coverage you’ll need, you should think about the best kind of policy to meet your requirements.

Typically, the main type of life insurance available in Australia is Term Life Insurance. With term insurance you get protection for a set period. It pays the sum insured only if you die or become totally and permanently disabled during this period. If you want cover for your mortgage, which typically lasts 25 years, and give your family a financial safety net, then term insurance is what you want.

Some term insurance policies are “renewable” for one or more additional terms even if your health has changed. However, your premium will normally increase with each renewal, because of your increase in age. It’s important that you check the premiums at older ages and the length of time the policy can be continued for.

Premiums are paid either annually or monthly in exchange for protection against certain risks. Many insurers place other types of personal insurance under the life insurance umbrella. These include:

Total and Permanent Disability Insurance (TPD)

pays out a lump sum benefit if you become totally and permanently disabled and it’s unlikely that you will even be able to work again.

Trauma Insurance

also known as critical illness insurance, pays a lump sum benefit upon diagnoses of a critical illness.

Income Protection Insurance

cover up to 75% of your salary should you be unable to work due to sickness or injury.

Funeral insurance

provides a lump sum benefit to help you pay for the cost of a funeral or other related expenses upon your death.

Finding an affordable policy

An insurance policy is only as good as the company that backs it. You want to make sure you choose a company you can rely on to be around for as long as you’ll need coverage. That’s why it’s important that you compare similar policies from different companies to find which one is likely to give you the best value for your money.

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Finding insurance is not easy and a simple comparison is not enough. There are other things to consider. For example:

  • Do premiums or benefits vary from year to year?
  • How much do the benefits build up in the policy?
  • What part of the premiums or benefits are not guaranteed?
  • Are there special policy features that particularly suit your needs?
  • Does the company offer tips regarding how to save on insurance?

Remember, no one company offers the lowest cos at all ages for all kinds and amounts of insurance. It’s important that you shop around first. Speak with a specialist advisor at Life Insurance Direct about your options.

At Life Insurance Direct we understand that life insurance can be a difficult subject to understand. To make things easier for you, we have put together a number of life insurance guides which will help you as you go through the comparison process with us.

More Life Insurance Guides

Below guides are a must read if you want to learn how to buy the most affordable and comprehensive coverage for you and your family.

Life Insurance Australia

A guide to insurance in Australia. Find out if where you live affects the price of your insurance

Pre-existing medical conditions

Can you get insurance cover if you have a pre-existing medical condition? Find out.

Life insurance exclusions

If you have exclusions in place on your policy, this is a must read.

Mental Illness

Take a look at how your condition might affect your insurance cover.

A guide to senior life insurance

Affordable insurance for seniors isn’t that difficult when you know what to look for.

Australian Health Statistics

Read some stats to help you make an informed decision about your personal insurance needs.

Life Insurance Calculator

A number of factors will go into calculating the level of your life cover that will suit your needs.

Families and couples

You may be able to receive discounts of free child cover for your family life insurance.

Extreme Sports

If you participate in sky diving, motocross, kite surfing or similar adventure sports, we may be able to find you the cover you require.

Published: November 24, 2016

Ask an Expert?

4 Comments

  • Mandy |

    Why are your prices so competitive to AAMI and Bupa insurance?

    • Russell SPECIALIST
      Russell |

      Great question, it is because we primarily use “Retail” policies which generally have cheaper premiums than “Direct” policies and hard to believe but true also generally provide greater features and benefits too! This is why we built the industry first Quote index to highlight this to customers.

      The reason why “Direct” policies which AAMI & Bupa insurance policies fall into is that they need to increase the premiums to cover their marketing costs & they generally ask less questions in the application (and therefore know less about you and any associated risks about you). They then adjust the premium accordingly!

      We have this resource here which goes into more of the details in differences between “Direct” & “Retail / Advised” Policies as there are a few other important things to know.

  • Dr I R |

    I am a retired specialist General Practitioner. I was granted permanent residency status in Australia in November 2015.
    DOB 09/09/1943. Currently in good health and go to gym for circuit and resistance training for 90 minutes 3 x per week
    I am married and live in Claremont, Perth WA.
    I would like to replace my South African insurance policies with an AUD 1million policy.
    What would the requirements be and what would I be looking at as a premium on this amount of cover?

    • Brett Lenertz SPECIALIST
      Brett Lenertz |

      Thank You for reaching out to us Dr …. Sounds like you are in excellent health which is always good when it comes to Life Insurance. As you now have Permanent Residency in Australia, you do have options for Life Insurance only in the Australian Market but this would need to be looked at rather soon as policy inception is limited to taking out cover before the age of 75. Likely the Insurers will require a medical and a blood test during the application process or recent results of such. The level of cover that you are applying for will have to be financially viable and reflect your personal circumstances also. We make the process easy at Life Insurance Direct so please feel free to contact us on 1300 135 205 and one of our Life Insurance Specialists can discuss your options and compare up to 11 x Life Insurance Companies in the Australian Market for you. We look forward to hearing from you.

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