Life Insurance Policy Options
If you’re looking for a cheap life insurance policy, but you’re worried that it won’t offer sufficient protection, be sure to review the built-in benefits the insurer offers and which low-cost optional extras you can add to enhance your policy.
Published May 30, 2018
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Insurance companies in Australia generally offer a number of life insurance policy options designed to help you customise your policy to suit your needs. Each company offers different additional options, so be sure to carefully review your product disclosure statement (PDS).
Types of Options
There are generally 3 types of life insurance policy options:
1. Additional Policy Options
Additional policy options are designed to enhance your policy. There is no obligation to include these in your policy, but if you want them, you’ll have to pay for them.
2. Premium structuring options
There are a number of premium structuring options available to you, including level, stepped and hybrid premiums.
3. Built-in benefit options
Depending on the insurer, you might have access to several built-in benefits that you can use free of charge.
Additional, Paid-for Options
Accidental Death Insurance
Accidental Death Insurance pays an additional lump sum benefit if an accident causes your death. This can also be purchased as a stand-alone policy.
Paid child cover
For an extra fee, you can cover your child for up to $200,000 worth of life cover.
Business future insurability
Following a business event, for example, an increase in your shares, you can increase the cover amount for life, TPD and Trauma cover without having to provide additional medical information.
Needlestick cover
Designed to protect medical professionals from needle stick and splash injuries during their regular working duties.
Premium structuring options
There are several available options when choosing a premium structure, including:
Stepped premiums
This is the most common premium style in Australia and is usually cheaper at the start of your policy, increasing every year as you get older
Level premiums
Only available via retail policies. Level premiums start out being more expensive but usually do not increase as you age, staying relatively level up until your 65th or 70th birthday, depending on the insurer.
Hybrid premiums
Optimum premiums are a mix between stepped and level premiums. Start at a higher then normal stepped premium rate, converting to a level style premium when your stepped premium reaches a pre-determined price.
Built-in benefit options
- Inflation Protection also known as CPI Increases ensures your policy keeps up to date with inflation. While it will generally be automatically applied to your policy, you can elect not to use this option.
- Free child cover of up to $10,000 is available from select insurers.
- Premium freeze option can help you keep life insurance costs affordable by freezing your premium at its current price, thus reducing your cover amount each year.
- Suspending your cover benefit allows you to suspend your cover and premiums for up to 12 months when you’re experiencing financial hardship.
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